Although this chapter is primarily concerned with credit risk, there are other types of risk that the financial industry faces. Some of these risk types are:
- Operational risk: Risk emanating due to failure in processes, systems, and errors caused by human intervention. For example, transactions being credited to incorrect accounts due to the absence of adequate checks, or a system upgrade to the core banking system failing, thereby preventing customers from accessing their accounts.
- Market risk: Risk arises due to dramatic and adverse movements in market prices. Both the on-and off-balance sheet positions are vulnerable to factors that affect the overall performance of financial markets in which the firm is involved. It is also ...
