RISK AND TREASURY

Risk refers to the ability of a bank to access cash to meet funding obligations. The various
risk in the management can be brought into three categories namely risk management
policies, interest risk management and credit risk. Of these three changes can be made only in
risk management policies and interest risk management. In risk management policies the area
where changes could brought are risk management budget and overdue credit allocation. A
change in the two field will lead to a variation in remaining back office personnel and indeed
affect associated personnel cost. This change reflects the total cost. When intertest rate risk
management is considered only 2-years swap and 5-years swap can be modified. The
outcome of this can be witnessed in the credit risk.

In simulation there are three practice rounds along with other eleven graded rounds. In the
three practice rounds almost nothing has been modified in this section. In round 1 risk
management budget was altered as 2400 and in overdue credit allocation, 10 was replaced by
9. But little was done to interest risk management. Round 2 seemed stable so it was left
unaltered. Whereas in round 3 was transformed into 151000 which comes in 2 years swap
under interest rate risk management. Round 4 was left behind to sleep. 3500 was changed to
6500 in risk management budget of round 5. All other items of round 5 remains unaltered. In
round 7, same field as in round 5 was changed, 6500 got replaced by 7500. Similarly, in
round 11, 7500 got modified to 8500 in risk management budget. Round 6, Round 8, Round 9
and Round 10 remains as such.

Treasury in a business context is a key, specialist function of the finance department.

Treasury involves the management of money and financial risks in a business. The balance
sheet of the company is classified into assets, liabilities and equity. Changes can be made in
interbank lending, treasury bonds and foreign bonds under assets. In the liability section,
transformations can be brought only at long term bond and subordinated debts. Shares,
dividend payments are the only fields were alteration can be made in equity.

In the three practice rounds almost nothing has been modified. In round 1 treasury bonds and
foreign bonds got replaced by 5.0, all other items in round 1 remains same. 0 was changed to
100 in interbank lending of round 2, the rest of the field went unaltered. In round 4 and 5, 0
got transformed to 300 whereas in round 7 1000 took the place of 0 in interbank lending. The
dividend payment was modified to 2 in the same round. In round 11, interbank lending was
changed to 350. Along with this long-term bond and subordinated debt got altered from 1000
to 10000 and 1500 to 15000, respectively. Round 3, Round 6, Round 8, Round 9 and Round
10 remains as such.