introduction

The role of risk management is to evaluate, respond to and monitor risks that arise in the execution of a
company`s strategy to become the best at what it does best.. It is essential that business growth plans
are properly supported by an effective risk management infrastructure. Usuall the risk culture is closely
aligned to that of business so to ensure trust and understanding, while retaining independence in
analytical and objective decision-making at every level. Risk management cosistst of Enterprise risk
management which was identified by the COSO framework (2004) as a process, effected by an entitys
board of directors, management and other personnel, applied in strategy setting and across the
enterprise, designed to identify potential events that may affect the entity, and manage risk to be within
its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. ERM
is a frame work that support the oveerall accomplishment of all the objectives set by a firm. For every
financial institution inn zimbabwe, it is mandated to manage risks inorder to survive therefore risk
managemnt is a must. The management of the financial institution also has to be takeen into control
such that all tghe objectives are acchieved within the set time limits.
Key terms: risk management; management; financial institution
defination of key terms
risk management: According to Edwards (1995) it is the identyification, measurement and control at
most economic cost of the hazards which can threaten life, property and the assets and earnings of an
organisation.
Management: Drucker (1974) identifiesd management in business as the function that coordinates the
efforts of people to acoomplsh goals and objectives by using available resources efficiently and
effectively.
Financila institution: Financial institutions are organizations that process monetary transactions,
including business and private loans, customer deposits, and investments.
Types of risk that a business might face
Interest rate risk
barklays as a bank and a financial institution faces interest rate risk.. Interest rate risk is a situation
whereby the maturities of their liabilities and assets are mismatched. According to Pouzikova (2000)
interest rate risk is the exposure of banks financial conditions to adverse movements in interest rates
Interest rate risk exists in an interest-bearing asset, such as a loan or a bond, due to the possibility of a
change in the asset's value resulting from the variability of interest rate. Interest rate risk management

has become very significant, and various instruments have been introduced to manage or deal with
interest rate risk.
Market risk
market risk is The risk that earnings, capital or business objectives will be adversely impacted by
changes in the level or volatility of market rates or prices such as interest rates, foreign exchange rates,
equity prices, commodity prices and credit spreadsThe financial institutions also face market risk. They
incur market risk for their trading portfolios of liabilities and assets if unfavourable movements in the
prices of these liabilites or assets occur. According Sornette (2012) "market risk is the possibility for an
investor to experience losses due to factors that affect the overall performance of the monetary markets.
" This risk can also be called "systemic risk," cannot be overcomed through diversification though it can
be hedged against.
Credit risk
accourding to Barklays, credit risk is The risk of financial loss should customers, clients or market
counterparties fail to fulfil their contractual obligations. Organisations incur credit risk or default risk
when their clients do not pay their loans and other obligations. According Townsend (2014) " a credit
risk is the risk of default on a debt that may arise from a borrower failing to make required payments
". In the first aspect, the risk is that of the lender and includes lost principal and interest, disruption
to cash flows, and increased collection costs. The loss may be adquate or partial and can lead to a arise
in a number of many circumstances.
Liquidity risk
Liquidity risk is the risk that obligations are not met as they fall due. They bump into liquidity risk as a
result of too much withdrawals of liabilities by their customers. According to Rouzi (2013) "liquidity is
a financial institutions capacity to meet its cash and some collateral obligations without incurring
unwanted losses ". Adequate liquidity is dependent upon the organisations ability to efficiently and
effectively meet both unexpected and expected cash flows and collateral requirements without
negatively affecting either daily operations or the monetary condition of the institution. Liquidity risk is
a risk to an institutions financial condition or safety and soundness arising from its inability (whether
real or perceived) to meet its contractual obligations.
Linkages between management and risk management

managemnt
the main link between management and risk management is the fact that have to be undertaken by a
financial instution. For a financial instution such as barclays, it means that the firm is managemnt both
its objectives and at the same time managiong the risks that are associated with opearting the business.
In operating, the business, daily the firm faces risks due to risk appetite. This means that the risk needs
to be managed. Risk managemnent is an integrated part of teh whole maanagement system in an
organuisaation. The corporate risk management function assists with evaluation and compiles a
summarised risk report. The evaluation results and key risks are reported to corporate management and
the Board of Directors. The core functions which are organising , controlling , leading and planning are
all conducted in risk management.
planning
Bose (2012) identified planning as the process of deciding in advance what isn to be done, where how
and by whom it is to be done. As a process, planning involves anticipation of future coures of events
and deciding the best course of action. Therefore basically it is the process of thinking before doing.
This is a preparatory step taht allows for thev firrm to be prepared for future risks that may arise and
hinder the operations of the company. The fact that risks ariose means that they need to be plannerd
against and risk management then comes into play. In management Planning means looking ahead and
chalking out future courses of action to be followed. It is a preparatory step. It is a systematic activity
which determines when, how and who is going to perform a specific job. Planning is a detailed
programme regarding future courses of action.It is rightly said Well plan is half done. Therefore
planning takes into consideration available & prospective human and physical resources of the
organization so as to get effective co-ordination, contribution & perfect adjustment. It is the basic
management function which includes formulation of one or more detailed plans to achieve optimum
balance of needs or demands with the available resources.
However no matter how best our laid plans maybe, as an organisation we can never be fully prepared
for the future. this is because a risk is "an uncertain event or condition that, if it occurs, has a positive or
negative effect on a project's objectives." Risk is inherent with any project, and project managers should
assess risks continually and develop plans to address them. The risk management plan contains an
analysis of likely risks with both high and low impact, as well as mitigation strategies to help the project
avoid being derailed should common problems arise. Risk management plans should be periodically
reviewed by the project team to avoid having the analysis become stale and not reflective of actual

potential project risks.

Planning is one of the most important project management and time

management techniques. Planning is preparing a sequence of action steps to achieve some specific goal.
If a person does it effectively, he can reduce much the necessary time and effort of achieving the goal. A
plan is like a map. When following a plan, he can always see how much he have progressed towards his
project goal and how far he is from his destination. the barklays group maintains a contingency funding
plan that details how liquidity stress events of varying severity would be managed. As the precise nature
of any stress event cannot be known in advance, the plans are designed to be flexible to the nature and
severity of the stress event, and provide a menu of options that could be used as appropriate at the time.
Barclays also maintains recovery plans that consider actions to generate additional liquidity in order to
facilitate recovery in a severe stress.
controlling
Control, or controlling, is one of the managerial functions like planning, organizing, staffing and
directing. It is an important function because it helps to check the errors and to take the corrective
action so that deviation from standards are minimized and stated goals of the organization are achieved
in a desired manner. According to modern concepts, control is a foreseeing action whereas earlier
concept of control was used only when errors were detected. Control in management means setting
standards, measuring actual performance and taking corrective action. In 1916, Henri Fayol formulated
one of the first definitions of control as it pertains to management, he said it is the control of an
undertaking consists of seeing that everything is being carried out in accordance with the plan which
has been adopted, the orders which have been given, and the principles which have been laid down. Its
object is to point out mistakes in order that they may be rectified and prevented from recurring.
Risk control is the method by which firms evaluate potential losses and take action to reduce or
eliminate such threats. Risk control is a technique that utilizes findings from risk assessments
(identifying potential risk factors in a firm's operations, such as technical and non-technical aspects of
the business, financial policies, and other policies that may impact the well-being of the firm), and
implementing changes to reduce risk in these areas. Risk control takes that information gained during
risk assessments and develops and applies changes to control the risks. Risk control can involve the
implementation of new polices and standards, physical changes and procedural changes that can reduce
or eliminate certain risks within the business.
Risk control is an important action taken by firms that is intended to proactively identify, manage and

reduce or eliminate risks. In order to induce the correct behaviour and decision-making, we actively
manage the composition of our balance sheet and contingent liabilities through the appropriate transfer
pricing of liquidity costs. Mechanisms used to do this include funds-transfer pricing, economic funds
allocation of behaviouralised assets and liabilities, and contingent liquidity risk charging to the
businesses. Such mechanisms are designed to ensure liquidity risk is reflected in product pricing and
performance measurement, thereby ensuring that the liquidity framework is integrated into businesslevel decision-making to drive the appropriate mix of sources and uses of funds.
leading
Leading is another of the basic function within the management process "Leading is the use of influence
to motivate employees to achieve organizational goals" (Richard Daft). Managers must be able to make
employees want to participate in achieving an organization's goals. Three components make up the
leading function which are motivating employees, influencing employees and forming effective groups.
The leading process helps the organization move toward goal attainment.
The most important thing effective leaders do to manage risks is to make it an explicit part of the
strategic plan, and demand buy in from all levels of the organization. Risk management becomes a
systematic effort that is pervasive through all operating units, from sales to marketing, supply
management to manufacturing, and internal controls. It is given a priority commensurate with its
importance, right in line with market expansion or critical support functions. All these functions are
explicitly targeted for investment and effort. Based on the plan approved by the leadership, managers at
every level are made responsible for implementing tactics that will aggregate into a risk mitigation
strategy. Further, they will define and collect relevant performance data to demonstrate that their actions
are connected with desirable outcomes, or not. Leaders want to review the plan regularly, at least
annually, and make adjustments as needed. Organizations environments are changing rapidly, and the
kinds and levels of risk will change at the same rate. Every internal changeincluding promoting a
person from one role to another with a different risk profile may be a reason for a revision in that part of
the overall risk management plan.
organising
Enterprise risk management is part of the management system. Risk management at Barklays is based
on consistent risk identification, assessment and reporting across the company. Risk management is an

integrated part of the management system and the risk aspect is incorporated into the everyday activities
and decision-making of all business areas and core corporate support processes. The risks in each area
are identified and evaluated each year in all Ruukkis operations and the associated risk management
strategies are determined as part of business planning and leadership. The corporate risk management
function assists with evaluation and compiles a summarised risk report. The evaluation results and key
risks are reported to corporate management and the Board of Directors.
differences between risk management and management
However there exist differences between Risk management and Management in an organisation. The
difference is that Management is a function which controls the organisation as a whole and risk
management only has control of managing risks meaning that it operates as a department .Management
is a process which includes planning, monitoring, organising and leading the efforts of all the
organisational members with the use of all the available resources and with the aim of achieving all the
organisational goals. For example the management at Barclays makes sure that they are in control of all
the departments in the bank which include the accounting department, the risk management division,
the sales department and the treasures department .This clearly shows that the management has more
workload as compare to the risk management. Risk management is only centered with its activities in
that department mainly fall under the finance division and the people from this department evidenced
by at the Barclays bank clearly show that they are not flexible they are just rigid in their departments.
Another disadvantage is in terms of the objectives of each department. The objective of the
management is the achievement of the organisations overall objectives whereas the objectives of the
risk manager are to mitigate against risks. Risk management goals and objectives should be consistent
with and supportive of the enterprises business objectives and strategies. Therefore, the organizations
business model provides an important context for risk management. Business risks are inherent in all of
these elements. As the enterprise executes its strategy, it creates and increases its exposures to
uncertainty. Therefore, business objectives and strategies provide the context for understanding the
risks the enterprise desires to take.
The difference between the two is that the management is for the whole activities of the organisation.
Management has been described as: the process of planning, organising, leading and controlling the
efforts of organisation members and of using all organisational resources. Risk management is the
identification, assessment, and prioritization of risks

followed by coordinated and economical

application of resources to minimize, monitor, and control the probability and/or impact of

unfortunate events or to maximize the realization of opportunities. Risk managements objective is to

assure uncertainty does not deflect the endeavor from the business goals.
conclusion
both risk management and management are important for an organisdatio. risk management deals with
that risks that the firm faces inorder to accomplish its long term goals. these goals need to be
monitored and do not depend on risk managemnt alone. therefore this is the part where the
management of the whole organisdation comes in. without any objectives to fulfill, there would be no
risk to manage therefore it is the risks that the firm attracts in accomplishment of its goals.

references
COSO (2004) Enterprise Risk Management Integrated Framework.
drucker p. (1974) Management: Tasks, Responsibilities, Practices, Harper & Row, USA
edwards L, (1995) Practical Risk Management in the Construction Industry. Telford, Canada
Henri Fayol (1949). General and Industrial Management. New York: Pitman Publishing
PMBOK Guide 5th Edition, Glossary
Sornett.D (2012), Market risk and Financial Markets, Published by Springer publishers,
Pem Russia
Pouzikova.T (2000), The controlling of interest rate in Banks, Published by
Hermannsted, United Kingdom
Rouzi.R (2013), Liquidity risks in Banks, Published by Springer publishers, Milan,Itay.
Richard L. (2010) teh leadership experience 5th edition, paperback.
Sornett.D (2012), Market risk and Financial Markets, Published by Springer publishers, Pem Russia
townsend R. M, (2012) Barriers to Household Risk Management: Evidence from India. IMF.