Risk Identification:

The first step is to identify the risks and assess the influence of that risk in context of the banking business, particularly in HBL For the purpose we discussed it with the officials of HBL and we identified the following risks: S# Risk Risk Description Some type of businesses are defined as highly risky by the management such as law firms, media channels, newspapers, publishers, property dealers and exposed persons If a person or firm has been defaulter in past with any bank or institution, that can be again and cause the loss for the bank The variation in economic conditions of the country can affect the credit policies resulting in increased credit risk and chance of loss Personal condition of a borrowers is highly considerable which includes the social class of the borrowers along with his health that will he be able to generate the money and return the credit If the growth of the business of the borrowers stops or faces sudden losses of any kind, can become the purpose of loss of the bank In case of any fictitious documents of the property the ultimate loss will be of the bank Age factor is also involved somehow as the old age borrowers can be threat for bank A proper assessment of the client regarding all the matters is of great importance. Any wrong detail can cause the loss for the bank Instability in the political system of the country is need to be assessed properly as it can cause in closer of several businesses and increase the chance of loss for the bank

Customer Risk

Defaulter Risk

Economic Effects

Personal Condition of Borrowers

Business Losses

Property Documents

Age of the Borrowers

Assessment of the Client

Political System

Measurement of the Risk:

It is very important step in the process of risk management and weve used the following criteria to measure the risk: The probability that the risk will occur The impact of the risk if it occurs

S# 1 2 3 4 5 6 7 8 9

Risk Customer Risk Defaulter Risk Economic Effects Personal Condition of Borrowers Business Losses Property Documents Age of the Borrowers Assessment of the Client Political System

Probability 0.50 0.30 0.70 0.30 0.50 0.30 0.10 0.50 0.70

Impact 0.40 0.80 0.20 0.40 0.20 0.80 0.20 0.80 0.20

Threat 0.20 0.24 0.14 0.12 0.10 0.24 0.02 0.40 0.14

Where the range is as follows: Higher Risk: Moderate Risk: Lower Risk: 0.01 0.05 0.06 0.15 0.16 0.72

Prioritization of the Risk:

So, after implying the prioritization criteria, the matrix will be as follows:

S# 1 2 3 4 5 6 7 8 9

Risk Assessment of the Client Defaulter Risk Property Documents Customer Risk Economic Effects Political System Personal Condition of Borrowers Business Losses Age of the Borrowers

Threat 0.40 0.24 0.24 0.20 0.14 0.14 0.12 0.10 0.02

Priority Level Higher Higher Higher Higher Moderate Moderate Moderate Moderate Lower

Mitigation of the Risks:

S# 1 Risk Assessment of the Client Mitigation Assessment of a client is of a great importance and everything else starts after the appreciative results of the assessment. First step is hire an experienced and knowledgeable person who knows the difference and fulfill all the needed legal necessities along with the verifications of clients national identity card, passport, property documents and all other relevant documents. 2 Defaulter Risk It needs a proper care of the responsible person as the Electronic Credit Information Bureau (ECIB) is already maintaining all the information on the credit history of the clients. It includes the transactional data of the client which is very helpful to understand the behavior of the client and according to that understanding, bank can maintain or modify the policies structure to improve the efficiency of the credit recovery or can also decide to not to approve any credit for a particular client. Moreover, an additional policy must also be in place to recover the credit in case of any sudden defaulter threat or risk on the basis of client behavior. 3 Property Documents This risk is initially covered in clients assessment but a proper field work is needed to be workout in addition to assure the physical existence of the property along with the legal documentations and any relevant matter in process that may cause any hurdle in future to recover the credit in case of defaulter etc. Moreover, a proper check and balance on the property is should also be in place to avoid any potential threat regarding the property or its documentation.

Customer Risk

Some specific type of the clients are a potential risk increasers for the bank due to their nature of business which are however also potential customers for the bank. So, it is not an option to just lose those customers due to certain threats. All the bank needs is to hire a highly practical experienced person as an employee and provide him the relevant resources for a specific research on this segment to identify the threats and develop the suitable measures through which a proper assessment of these customers can be evaluated and avoid the involved risks.

Economic Effects

Economic conditions of the country are showing a continuous variation and keep threatening the bank for its operations. Mostly, the bank have safety measures in place but in addition bank needs to make assure that the motivation and satisfaction level of employees is high and they are committed to their work which actually assures that they are tracking the economic conditions and their effects on the bank operations and policies along with the development of new policies. Moreover, make sure that they are capable of facing any huge variation and avoid the maximum risk of loss for the bank.

Political System

Instability in political system and influence of political system is also one of the major risk that need to be taken care of and for the purpose bank need to develop some independent policies on the basis of equality concept for each and every borrower with no exceptions. However, its implementation might be a huge challenge for the bank but considering the reputation and management system, it is possible that the influential people will respect the policies.

Personal Condition of Borrowers

This risk can be avoided quite easily. All the bank needs is to check the medical history of the client to ensure that he is free of any permanent disease or place a proper setup of recovery from the next of kin of the diseased client.

Business Losses

Initial policies are already in place to calculate the ratios and evaluate the trend analysis to know about the business of the client but in case it starts unrecoverable losses in future, bank needs to put some contingency planning for the recovery of the credit. Such as, providing some consultancy to the client for his business through which he might be able to avoid his losses and become a positive word of mouth for the bank.

Age of the Borrowers

It is a very small factor of risk but a very small part of attention requires that the bank should also check the age of the borrowers to ensure that he would be able to fulfill the requirements of the credit along with the recovery of the credit. Moreover, in case of any trouble put a proper next of kin setup is in place.