Risks Defined

1. Credit Risk: arises from an obligator's failure to perform as agreed.

2. Interest Rate Risk: arises from movement in interest rate in the market. The interest rate exposure is created from the mismatches in the interest rates of assets and liabilities of an organization.

3. Liquidity Risk: arises from an organization's inability to meet its obligations when due. The liquidity exposure is created by the maturity mismatchmes of the assets and liabilities of the organization. This risk is measured through tenor-wise cumulative gaps.

4. Price Risk: arises from changes in the value of trading positions in the interest rate, foreign exchange, equity and commodities markets. This arises due to changes in the various market rates and/or market factors.

5. Compliance Risk: arises from violations of or non-compliance with laws, rules, regulations, prescribed practices or ethical standards.

6. Strategic Risk: arises from adverse business decisions or improper implementation of them.

7. Reputation Risk: arises from negative public opinion.

8. Market Risk: is defined as the potential changes in the current economic value of a position (i.e. its market value) due to changes in the associated underlying market risk factors. Trading positions are subject to mark-to-market accounting ie. positions are revalued based on current market value.

9. Operation Risk: is loss resulting from inadequate or failed internal process, people and systems or from external events. These includes fraud risk, communication risk, documentation risk, cultural risk, external events risk, legal risk, regulatory risk, system risk and so on.