Tag: banking sector

customer analytics in retail

4 Ways Banking Analytics is Transforming the Banking Industry

The application of big data in banking can help companies to harness siloed data and offer personalized banking solutions to customers to drive profitability.

With the advent of big data analytics, the banking sector is focusing more on responding to the expectations of customers in real-time. Today companies in the banking industry are adopting to latest technologies to offer best services to their customers and stay ahead of the curve. By leveraging banking analytics solutions, companies are now able to digitize their core business operations and analyze their organizational structures. Consequently, digital technologies and new delivery platforms have become very important to drive organization performance. Companies in the banking sector are now focusing on integrating their payment methods, re-configuring delivery channels, and applying advanced analytics in banking operations. All these have paved the way for massive transformation in the banking industry. In this article, our team of analytics experts has discussed a few important ways in which banking analytics is helping the banking sector to design targeted marketing campaigns, manage risks efficiently and remain profitable and improve profitability.

Learn how our customized analytics solutions can help you gain real-time visibility into your customer data. Request for more information below.

banking analyticsHow is banking analytics transforming the banking industry?

Through risk management

Banking analytics solutions can provide actionable insights into transactions and customer behavior patterns. This can not only help businesses to avoid potential risks but also offers detailed insights into factors affecting profitability. Also, using big data analytics, companies can analyze regional data of their customers and also the historic sales data. Furthermore, this can help them to determine the market trends and design their strategy to sell their services. Additionally, with the help of advanced analytics in banking, companies in this sector can analyze the factors that cause borrowers to default on loans.

By automating marketing and sales processes

Banks can leverage banking analytics solutions to analyze the sheer volumes of customer data to better understand their customers. This can help them to understand the needs and demands of customers and addresses them proactively. Also, by utilizing big data analytics in banking, banks can automate the sales and marketing processes. Consequently, the right products can be marketed to the customers at the right time and through the right channel.

Are you finding it difficult to ensure complete safety across all financial products, processes, and transactions in your organization? Our banking analytics solutions can help. Get in touch with our experts now.

By guiding the product innovation phase through performance analysis

Banks can use banking analytics solutions to gauge the performance of the business as well as employees. This can help to design new products and offerings based on the current demand of customers. Also, this can help them to train their employees for peak times and achieve the target in the real-time. Banking analytics can also be utilized by banks to understand the nature of products required by customers and make offerings accordingly.

Our big data analytics solutions can help you manage risks more effectively to maximize ROI. Request for FREE proposal to gain more insights into our portfolio of services.

By providing useful insights through analytics dashboards

Companies in the banking industry can use banking analytics dashboards to visualize customers data in real-time through graphs, charts, and customizable interfaces. Such data can be further used to run queries and analyze the type of loans, quality of assets and monthly profit from the business operations. Managers can run queries and pull reports based on their needs. They can analyze the percentage of loans by type, monthly operating expenses or profit and loss by region.

Quantzig help organizations to get a real-time view of their performance and factors that drive costs, and financial growth through customized analytics dashboards. Request a FREE demo right away to know more.

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Is Customer Analytics the New Kingpin for Banking Services Companies?

For modern banking services providers, understanding the customers is the foundation for a sustainable competitive advantage. The internal and external data sources available to banking services companies can be great sources for guiding product development, customer communication, innovation, and growth. This data can be further meticulously analyzed using advanced capabilities such as customer analytics through which banking services companies can get to know their customer at a more granular level. Furthermore, it can help in effective customer segmentation that reveals specific intelligence that could otherwise be obscured by the sheer volume of data. These insights aid banking services companies identify messaging strategies for marketing and customer service strategies and also gain a better understanding of the customer lifecycle and predict customer behavior.

Why is customer analytics important in banking services?

It is high time for banking services companies to up their game in customer analytics. Here’s why:

Analytics is the new normal

 As a result of low-interest rates, moderate fee revenue, onerous regulation, and a less than robust economy, the banking services providers are expected to remain revenue challenged for the foreseeable future. So, it will be more important than ever for banking services providers and credit unions to focus on all possible strategies that would help them reduce costs and increase revenues. Some of these strategies that can be achieved by customer analytics include:

  • Better management (and measurement) of sales leads across channels
  • Inclusion of custom customer incentives/rewards to influence behavior
  • Improved targeting of customer segments
  • Moving from a product focus to a customer focus 

Achieve customer centricity

Customer delivery and communication channels are expanding. This means that more customers interacting with their financial providers and banking services companies are using online and mobile channels, making it easier to gain insights into real-time sales and services. Analytics can respond to this rapid migration to digital channels by:

  • Integrating sales and service tools within a new digital environment
  • Improving branch efficiency and effectiveness
  • Helping to drive high value, high touch traffic back to branches

Technological changes

Customer analytics is no longer a domain that can be used and accessed solely by highly skilled specialists. Today, these solutions can be easily accessed and used by marketers and other business users to answer complex inquiries. Improvements include:

  • Increased number of specialized vendor solutions and expanded talent
  • Collapsing of product silos and ability to process increased data sources
  • Cloud-based solutions

Establishing analytics as a true business discipline can help banking services prContact USoviders to grasp the enormous potential. Get in touch with us to know how we can help banking sector clients in establishing a customer analytics program to suit their organizational requirements.

How can customer analytics help banking services?

We at Quantzig have identified six levers that make customer analytics a core component for banking services companies to consider:

Customer Insights

Most financial marketers are highly interested in the ability to gain a better insight on current customers. Demographics and current product ownership form the foundation of customer insight. However, behavioral and attitudinal insights are gaining in importance as channel selection and product use have become more differentiated. Take the instance of sentiment analysis and social media analysis that are helping companies analyze in-depth about their customer emotions on social platforms. Furthermore, scoring models such as FICO is especially useful for banking services companies to analyze consumers’ credit history, loan or credit applications, and other data to assess whether the consumer are likely to meet their payment obligations on time in the future.

Business strategy

Customer analytics proves to be highly useful in banking services companies for product and channel development as well as economic forecasting, business improvements, risk analysis, and financial modeling.

Managing customer experience

Using customer analytics for customer experience management (CEM) helps banking services providers in delivering personalized, contextual interactions that will assist customers with their daily financial needs. Moreover, if done correctly, customer analytics enables the real-time delivery of product or service offerings at the right time, thereby ensuring a better customer experience.

Risk management

One of the more common uses of ‘big data’ today especially for banking services companies is in the area of risk and fraud management. The applications of data mining have expanded well beyond providing internal purchase and balanced insights. It now even includes transaction patterns and social media interactions that can provide a leading indicator of potential losses or fraud. The integration of structured and unstructured data in banking services can also be leveraged for traditional risk management including pricing decisions.

Marketing

Another traditional use of customer analytics in financial services is the ability to increase the effectiveness and efficiency of sales and marketing. The ability to derive insights on the likelihood of purchase based on the available information on individual customers has ushered in a seismic shift in marketing from product centricity to customer centricity. Banking services companies and credit unions are now able to make unique, timely, and relevant offers based on available customer insight rather than offering products and services based on what the financial institution would like to sell. This allows banking services providers and financial marketers to significantly improve the efficiency of marketing spending and the close rate of sales leads.

To learn more about how Data analytics solutions work in banking sector companies, request a proposal.

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Implementing customer analytics for banking services

The future is already here. The only drawback is that it is not evenly distributed. Banks services and companies in every other industry are already deploying advanced analytics to move their businesses forward. Quantzig has identified that almost every top bank lists advanced analytics among its top five priorities. Most plan to invest further in these techniques. A few banking services companies are already seeing the rewards. By establishing data lakes and centers of excellence and using machine-learning techniques these leaders have already built substantial foundations for their business.

 How do you know what analytics capabilities to invest in for your business? All you need is an analytics expert that can guide you on leveraging the available data by avoiding pitfalls in banking services and accessing the broad set of opportunities. At Quantzig, we understand these needs of our clients and are committed to helping them bolster their analytics capabilities. Request a demo to know more about our analytics solutions.

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Advanced Analytics for a Leading Banking Sector: A Quantzig Success Study

What the Client Wanted

A leading banking sector client wanted to build an effective customer’s payment gateway and allow teams of users to quickly identify themes, trends, and look at individual customer activity.

The Outcome

The client utilized the power of the centralized database to test the effectiveness of the payment control environment and identified the weaknesses across the banking sector.


Global Banking Sector Overview

The largest banking sector corporations in the world have significantly enhanced their capital position over the years since the global crisis. While there is an enduring debate in some corners that banking sector players are still not satisfactorily capitalized, it is certain that the dangerously thin buffers of the pre-crisis era are gone. Additionally, most banking sector corporations have resolved the majority of the legacy conduct issues. Moreover, mitigation expenses are falling and Request Proposalwhile banking sector corporations continue to reshape their footprints, players are signaling that the associated restructuring costs will shortly peak.


Banking Sector Challenges

Macroeconomic risks: For banking sector players, uncertainties in the macroeconomic setting together with persistent and high levels of debt across corporate, sovereign, and consumer sectors lay the groundwork for asset bubbles to burst in the event of instability.

Technology risks: Failure to capitalize appropriately in secure, agile systems that improve digital and mobile banking can result in significant damage for players in the banking sector while compounding the menace for cyber-attacks.


About the Client

An American multinational financial services corporation and investment bank headquartered in the United States. 

Client’s Challenge

The company wanted to make use of financial crime and advanced analytics to better quantify and categorize their risk exposure, assess the effectiveness of their financial crime programs, and detect and deter criminal behavior. Additionally, the banking sector client wanted to build an Request Solution Demoeffective customer’s payment gateway and allow teams of users to quickly identify themes, trends, and look at individual customer activity.


Summary of our advanced analytics engagement

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Business Impact

With the help of Quantzig’s advanced analytics, the banking sector client optimized their database for certain predefined searches by the customer, by value, and by country. The client also understood the flows down specific corridors and in certain currencies. Furthermore, the client gained a deeper understanding of their customer activity across the world with the help of Quantzig’s advanced analytics. This helped them utilize the power of the centralized database to test the effectiveness of the payment control environment and identify any weaknesses across the industry.

Advanced Analytics Solution Insights

Quantzig’s advanced analytics helps banking sector clients make improvements out of almost all their activities; thereby, enhancing the traditional P&L levers. Advanced analytics also directly improves the demand capacity management of a company by allowing real-time insights into the demand/capacity curve. Additionally, as advanced analytics eliminate problems from the supply chain, banking sector customers can enjoy more reliable and consistent delivery times and service quality.


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3 Interesting Ways Banks Can Curtail Customer Churn Rate | Quantzig

Acquiring new customers is a more expensive process when compared to the retention of old ones. This is one of the main reasons why leading companies have put reducing the customer churn and improving their customer retention capabilities on their priority list. The banking sector is among the industries recording the largest rate of customer churn every year.

The rising competition in the market, which gives customers the liberty of choice and better offers, is one of the primary contributors to customer attrition for retail banking companies. To state the obvious, providing effective, meaningful service is key to reducing customer churn. But how can companies in the banking sector get there and bring down customers leaving them for competitor brands?  To identify early signs of potential customer churn, banks first need to start getting a holistic 360-degree view of the customer base and their interactions across multiple channels such as bank visits, calls to customer service departments, web-based transactions, mobile banking, and social media interactions. This would allow them to detect early warning signs of customer churn such as reduced transactions or stoppage of auto-pay or negative experiences, and you can take specific actions to prevent churn. 

At Quantzig, we understand the impact that customer churn rate can have on your business. And to help banking and financial services companies provide the best customer service and reduce customer churn rate, our team of experts have highlighted three strategies that they must consider:

How to Curtail Customer Churn Rate?

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IR19

Promoting Brand Loyalty for a Renowned Banking Sector Client with Salesforce Analytics

The client: A leading banking sector player

Area of engagement: Salesforce analytics

The global banking sector is highly fragmented and includes segments such as retail, corporate, and investment banking and asset and wealth management firms. The retail banking segment has registered significant growth recently and has the potential to grow at a rapid pace in the coming years. Europe dominates the global banking industry and accounts for approximately 43% of total market share. QZ- Request free proposalLeading firms in the banking sector are also looking beyond compliance to optimize their businesses and improve financial performance, despite the current economic uncertainty.

The Business Challenge

The client, a renowned banking sector client with offices spread across the Americas, was facing predicaments in maximizing their revenue potential. As a result, the client wanted to build predictive models to assess customer attrition levels. Additionally, the client wanted to leverage the use of salesforce analytics to identify opportunities to optimize costs across the BFSI space in the Americas. The client also wanted to improve the quality and deliver better banking sector products and services.

Want to learn more about how our salesforce analytics solutions help banking sector clients?

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The Solution Benefits and the Business Impact

Quantzig’s salesforce analytics solution helped the baking sector client to refine their business models and shorten the time-to-market for the services rendered. This helped the client to improve customer retention and promote brand loyalty. Additionally, the client was able to deal with the rising competition in the market and effectively profile the profitable customers and their requirements.

Sales Force Analytics Predictive Insights

With the help of Quantzig’s salesforce analytics, companies can measure the performance of the workforce on a timely basis. Companies can leverage Quantzig’s salesforce analytics solution to improve sales training and create value. Companies can also better understand the customers and make quick data-driven actions.


Our analysis of the BFSI industry shows that banking sector players are facing challenges in terms of:

  • Consumer expectations: Today, it is all about the customer experience, and many banking sector players are feeling the pressure as they are not delivering the level of service that consumers are demanding, especially with regards to technology.
  • Increasing competition from financial technology companies: The increasing popularity of FinTech companies is disrupting the way traditional banking has been done. This creates a challenge for conventional banking sector clients as they are not able to adapt quickly to the changes – not just in terms of technology, but also in culture, operations, and other facets of the industry.

To know more about how our salesforce analytics solutions helped a leading banking sector player to identify the impact of the latest BFSI trends

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Improving Cross Selling: 4 Things Retail Banks Should Not Miss Out

It’s no secret that most people bank with multiple institutions at a time. According to a recent survey, only 19% of retail banking customers held three or more products besides a checking account with their primary bank. This means that companies operating in this sector have ample scope for improvement for spiking up their profits. One of the essential capabilities that players in the retail banking market must consider is working on their cross-selling abilities. Given the larger picture, cross selling can improve the bottom line for retail banking, wonder how? The incremental cost of selling to existing customers is much lower than acquiring new ones. Furthermore, cross-selling is an excellent way for retail banking companies to develop customer relationships and generate revenue from lower cost targets. We have identified four ways in which banks can improve their cross selling performance:Free demo

Focus on the lowest hanging fruit 

The simplest way to make a sale to an existing customer is through engagement services that help customers use an account they already own. These services that are a part of most financial institution’s customer onboarding programs include a debit card, online banking, mobile banking, direct deposit, bill pay, automatic savings transfer, personal line of credit and security solutions such as privacy protection. These retail banking services help ensure that the customer will use the products they own more often. Consequently, the customer retention of retail banking companies will improve along with the overall customer experience.

Build customer relationships

 For cross selling efforts to be successful, retail banking companies must keep the conversation going beyond the customer onboarding process. For this, companies can rely on a number of platforms available today such as email, direct mail, statement messaging, SMS texts and as part of the online and mobile banking platforms. Furthermore, banks must also ensure that these messages and communications should be highly targeted and personalized. This will help companies to build better customer relationships and better facilitate cross-selling in the long run.

Constantly monitor opportunities

To grab opportunities before someone else does, it is essential for players in the retail banking industry to continuously monitor the opportunities available. Rather than using product-driven programs that are done seasonally, banks can consider funding more customer-centric programs that evaluate each customer’s propensity to opt for one or more of the products and services that are offered. Customers prefer to be provided with suggestions of services that will help them with their finances. Getting the timing right is an integral part of a great customer experience.

Utilize offline and online channels

The effect of different channels of communication might vary from customer to customer. Retail banking companies must use as many direct channels as possible to reach out to the current customer-base as a part of a robust multichannel marketing plan. This includes direct mail, email, statement inserts, banner ads on your website, ATM messaging, outbound calling efforts, etc. Banks can also encourage the use of online and mobile banking to make tasks easier for customers. This also acts as a channel to use cross-selling techniques and pitch products to the customers.


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Top 5 Payment Trends the Financial Sector Is All Set to Embrace

The way people transact is changing by leaps and bounds. When was the last time you stood in a long queue at the bank to send money to someone? Most of us would have a hard time to remember. Modern consumers are blessed with a myriad of way to make and take payments. Though cash and cards still dominate the payments landscape, there appears to be a higher acceptance of mobile payment technology, especially by younger demographic groups. Furthermore, the exponential growth rate of IoT is expected to fuel new payment trends and use cases in the years to come. According to a recent survey of 1,500 consumers in the United States and Canada by Accenture, an analysis of consumer banking and payments trends and the likelihood to embrace future payment technologies was studied. Thanks to the advances in technology, we have seen significant changes in the banking and financial sector in the previous year. So, what payment trends are in store in 2018? Let’s take a look:Free demo

 

payment trends

Bitcoins and blockchain technology

Though many are still skeptical about making blockchain payments, their benefits cannot be ignored. Bitcoins and the blockchain technology are one of the most promising payment trends to watch out for this year. In 2018, the financial sector is all set to move towards adopting blockchain technology for various purposes including payment processing and trading functions. Banks and regulators can use blockchain as a completely transparent and accessible recording system, making auditing and financial reporting considerably more efficient.

Fintech and banking sector partnership

Banking sector companies are gradually coming to terms with the fact that they need to be in line with the technological advancements of fintech companies to survive in the long run. Partnerships between banks and fintech companies are the key to an expanded payments ecosystem. This year, the advancement of companies in the baking industry with the help of fintech technologies is an exciting payments trends to watch out for.

AI for routine transactions

Chatbots are one of the simplest forms of artificial intelligence that are revolutionizing mobile transactions in the financial sector. These chatbots can prepare and execute basic transactions with the approval of the customer. Now, a simple voice command from the customer is all it takes for these chatbots to provide basic financial snapshots and transfer funds. The ease at which it can be executed will surely make this one of the most favorite payment trends for 2018.

Biometrics and security in payments

Though the use of biometrics as a security measure has been prevalent for quite some time now, it is slowly becoming commonly used as a mechanism to authorize payments or transfer funds. This system adds another level of security to mobile payment systems. Once this system is installed, it eliminates the need for a password. Customers will be able to authorize payments with a just a fingerprint.

Rise of mobile wallets

Thanks to open banking and APIs providing the capability to enhance the customer experience with rewards and instant alerts, mobile wallets are finally poised to take off. The hassle-free and user-friendly experience that mobile wallets provide are going to make this one of the most popular payment trends among customers in the financial sector.


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Retail Banking Sector market analysis – How marketing mix optimization solutions helped a retail banking firm to find optimize the marketing mix

Marketing Mix Optimization for Retail Banking ClientQuantzig, a global analytics services provider, has recently completed their latest marketing mix optimization solution for a retail banking firm. The retail banking sector is under tremendous pressure to develop digital and data processing capabilities in order to simplify their business processes. Additionally, the companies in retail banking also need to cater to the growing needs of the customer about transactional accounts, personal loans, credit and debit cards, and mortgages.

“The marketing mix optimization solution offered by Quantzig assisted the retail banking client to accurately monitor, forecast, and periodically assess the impact of marketing campaigns on their market performance.” says an industry expert from Quantzig.

Request your FREE demo today!

The marketing mix optimization solution focused on quantifying the impact of marketing decisions of the past and forecasting future sales. By factoring in the impact of various media channels, the client was able to allocate marketing resources to form an optimal marketing mix optimally.

Additional Benefits of the Marketing Mix Optimization Solution

  • Evaluate the impact of different components of marketing plans
  • Understand the trends in the specific industry and pricing differences across sales regions
  • Develop robust marketing models to improve top-line revenue and ROI continuously
  • To know more, request a free proposal

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Top Challenges Hindering the Growth of the Online Banking Sector

The emergence of online banking has made offering banking services that much more comfortable. It has provided speed and convenience to the customers. Long gone are those days where customers had to drive to the banks and stay in the queue just to check their account balance or make deposits. Today, the same work can be done in the comfort of their home with just a few clicks. It comes as no surprise that  51% of US adults participate in online banking. Although online banking simplifies trading and provides convenience to both banks and the consumers, there are some distinct challenges and issues in the online banking sector. The problems can range from technical factors to habitual factors. Banks aspiring to drive the adoption rates of online banking should be well aware of suchFree demo issues.

Challenges in the online banking sector

Traditional banking habits

As mentioned earlier, 51% of US adults participate in online banking, however, on the hindsight, 49% of them still don’t. A majority of such people are susceptible to change and are well versed in traditional banking. Such aversion to change is usually due to lack of trust in the online system or the inability to operate online portals. As a result, banks are struggling to convince people to adopt online banking. In this case, banks can simply demonstrate the benefits of online banking and drawbacks of traditional banking to their customers.

Security and fraud instances

Security and protection against fraud and hacking are one of the most significant challenges for banks promoting online banking. In traditional banking, robbers would have to break into the bank to steal money from customers. However, skilled hackers can crack banks security measures to get customers detail and illicitly transfer money. For instance, almost 130 million British pounds were stolen from online bank accounts in 2015 through fraud. Additionally, the expansion of e-commerce provides an opportunity for fraudsters to misuse payment networks and steal sensitive information.

Cross-border transactions

One of the critical success factors of online banking is the implementation of the cross-border transaction as they play a vital role in the global trade. However, historically, cross-border payments have been slow, inefficient, and expensive. This is because most of the banks still use traditional infrastructure including national banking infrastructure which results in non-uniform development and software platforms that complicate cross-border transaction. New technologies including blockchain have been promising in overcoming such drawbacks to facilitate smooth cross-border transactions.

Technical issues

Banks are heavily reliant on online platforms to perform operational task including cash transfers, transaction recording, and information storing. A single system crash or a bug in their code can cause millions of dollars in losses or can even cause the bank to shut down its operations temporarily. Similarly, customers can lose trust in online banking when it’s not functional for that time. So banks face challenges in not only running their online platforms smoothly but also look towards their mobile apps.

Multi-currency and payment methods

The rise of global e-commerce has posed new problems in the online banking sector, that of using multiple currencies and payment methods. Consumers around the world use various payment methods including credit card, debit card, Paypal, bank transfers, e-wallets, mobile payments, and Sofortbanking. Merchants accept payments through such means and in different currencies. However, they face difficulty dealing with multi-currency, cross-border transaction, bank accounts, business entities, and regulatory hurdles. Such problems can usually be solved by selecting a payment service provider who can provide effective and immediate solutions to these problems.

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Types of Risks Looming in the Banking Industry

The banking industry is by far one of the largest industries in the world. In the US, insurance, real estate, and financial industry account for 20% of the total GDP. In order to keep the economy smoothly flowing, it is essential that banking industry operates seamlessly. However, the truth is that the banking sector is far from stable, as banks face numerous risks which threaten not only their profits but also the economic balance as a whole. As a result, it is essential that banks perform proper risk analysis and mitigate such perils for smooth operations. Keeping risks unchecked can lead the world towards financial meltdown as witnessed in the 2008 global crisis. So what are theFree demo kind of risks faced by the banks that needs to be regularly monitored?

Credit risks

Credit risk can be defined as a risk that a borrower or the counterparty will fail to meet their obligations by agreed terms. Such risks occur due to borrowers inability to pay back loans arising out of interbank transactions, trade financing, foreign exchange transactions, swaps, bonds, financial futures, options, guarantees, and the settlement of transactions. To simplify the matter, a $100 borrowed and not paid back will result in banks taking the loss in full. Additionally, banks will have to redress the money from their lenders who can be government, other banks, or the general public. Such losses in large amount can cause a serious dent in the economy. The banking industry usually declares the high rate of interest for borrowers who are associated with high credit risk. Banks need to perform timely risk analysis at an individual level to protect its wealth.

Market risks

“Mutual fund investments are subject to market risks.” You may have heard this statement a thousand times over in the banking industry. So what is a market risk? It is the risk that causes losses in the bank’s trading books due to changes in interest rates, credit spreads, equity prices, foreign-exchange rates, commodity prices, and other indicators. However, this type of risks only troubles players who are into investment banking space since they are active in the capital markets. Market risks are hard to assess as some factors are highly volatile like commodity prices, whereas some are stable, but small deviations can cause big consequences like interest rates. Proper risk analysis can be carried out by dividing it as per their potential cause, i.e., interest rate risk, equity risk, currency risk, and commodity risk.

Operational risk

Losses that could arise from failed or inadequate internal processes, people, and systems or from external events is termed as operational risk. It also includes legal risk but does not incorporate strategic or reputation risk. Humans are prone to making errors and mistakes, and such errors can occur in the banking industry due to improper operational risk analysis. Filling incorrect information while clearing a financial instrument can cause loss of time to rectify that error and in some cases loss of money due to improper crediting of balance. Apart from human risk, operational risk can also occur due to system risk or process risk.

Liquidity risk

Liquidity risk arises when banks perform inadequate risk analysis relating to marketability of an investment which cannot be sold quickly enough to prevent a loss. In simple terms, it is a risk that disables a bank from carrying out their day-to-day cash transactions. Even though it may seem like a theoretical example, it happened in Northen England when one of the bank was taken over by the government due to its inability to repay the investors during the 2008 global crisis.

Business risk

Businesses in the banking industry may be unable to meet its anticipated profit targets due to various reasons. Sometimes they may even incur a loss in place of making a profit. In case of banks and financial institution, missing the target can have severe implications as banks will have to shuffle their investment and public money. Business risk arises due to the failure of bank’s long-term strategy and errors in estimation and forecasting of profit metrics. A proper business risk management strategy can ensure sustainability even in the harshest economic environment. Conducting thorough risk analysis by guaranteeing flexibility and adaptability to the market condition can help banks avoid business risk.

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