Globalization, deregulation, and liberalization, the world over, are creating opportunities as also threats. The forces unleashed by globalization have intensified competition from within and outside the country. Business units are thus facing a multitude of risks, some familiar but also some quite unfamiliar ones, and higher volatility in cash flows. The significant influence that these events have on the financial system, strongly indicates the imperative for a move towards a comprehensive risk management system to keep in tune with volatilities in an ever changing uncertain business environment. This would enable IDBI Bank to take advantage of the upside, while managing the downside.

IDBI Bank in the course of its operations is exposed to various risks like Credit Risk (mainly on account of the borrowers and other counter-parties’ inability to meet their repayment commitments), Market Risk (arising out of movement of market values/interest rates impacting earning potential, fair valuation or realizable value of the portfolio), Liquidity Risk (impacts capacity to raise necessary funds to meet debt servicing requirements and disbursements), Exchange Risk (arising from movement of exchange rates of foreign currency) and Operational Risk (includes risks arising from operational processes including technology, manpower, procedures, etc.).

Risk management is a key element of IDBI Bank’s business strategy. Awareness, identification, measurement, monitoring and controlling risk, efficiently and effectively, in a manner geared towards yielding sustained economic value, is among the highest priorities of IDBI Bank. The objective of Risk Management is to move IDBI Bank up the value chain by ensuring sustained quality growth in and off the balance sheet items along with optimizing the bottom-line compensation to adequately cover the various risks embraced by IDBI Bank and provide accretion to its capital. In the process, Risk Management aims to create value – tangible and intangible – for its stakeholders (investors, customers, employees, regulators) – in the form of a superior balance sheet, adequate liquidity, healthy return on capital, trust and confidence, etc. In this direction, Basel-II guidelines, which will facilitate up-gradation of risk management functions, assume a critical role. While the Risk Group is entrusted with the key responsibility in risk management function, in pursuit of this enterprise-wide objective, IDBI Bank considers every employee of the Bank a Risk Manager.