What Are The Challenges Of The Banking Industry?

The common thought for most experts of any culture is that the banking industry is one of the most important pillars of stability within their communities. This system is at the center of most communities and in retrospect it classifies what the economic prospects would look like for the average individual. The banking industry is a very complex and competitive environment with people always trying to out compete one another for the best result. Ultimately, this is not an easy endeavor because today these branches are faced with a widening tent of business and with a changing list of stipulations for picking up these areas of interests. As the banking area continues to revolutionize the industry is faced with changing risk and insurance management

In day to day operations we are able to complete tasks faster and more efficiently with technology. Within the banking industry we have seen the rise in apps that allow one to transfer money, cashing checks by taking pictures, and much more. This is a great opportunity for many, but one is faced with the rising dilemma of how to defend themselves from these problems. These problems could range from cyber hacking, software malfunctions, and an easier environment for vulnerable information floating in the general environment. As a result, many banks are forming risk management strategies to combat these threats. According to the International Finance Magazine (2013) companies are investing more time and money into IT systems that could create a more favorable risk management outlook through the process of monitoring, database protection and more research. However, with all the recent cyber hacking incidents banking companies are doubling down and pouring money into this sector of risk management the International Finance Magazine states (2013). One strategic desion for doing so is the simple fact that the banking companies do not want to limit their customers on the technology options they offer because of the fear they could lose their edge to their competitors. Therefore, this is a new realm of risk management that mixes both R&D and the security of

According to the International Finance Magazine (2013) credit risk management is essentially the process in which a corporation like a bank goes through and evaluates if the investment or transaction is in their best interest to absorb. In resent years this has become more prudent because of the financial crisis and the legislation that followed the recession. This process forces banks to form a level on risk one investments that companies wish to take part in. This means if a company has a lower credit rating that essentially means there is more risk involved in the decision to give out an investment. Therefore, the bank would create a higher interest rate for the client to pay so the bank can get paid and the there is a small chance they would default on their loans. This ultimately protects the bank from bad investments, litigation, and creates a high need and desire for a solid business and overall diminishes the chances for economic trouble. Finally, referencing the insurance business for credit risk analysis, one could state that this is describing the whole underwriting process, to which determines if there is a complete risk or a complete gain or if there are events that could increase the likelihood of something bad happening to the company such as hazards. All in all, credit risk management is similar to the underwriting part of insurance