Risk and Transformations Services- Risk transformation is strategic rather than tactical, integrated rather than fragmented, and systematic rather than bolted-on. Anything less will likely waste resources as well as opportunities to position the institution for future growth and competitiveness. In this era of disruption and competition, transformation is a business imperative for companies across all industries. Risk Transformation is the continual evolution of an organization’s risk function, systems, and processes required to meet strategic objectives and regulatory requirements.
Risk is inherent in banking and is unavoidable. Risk-based policies and practices enhance the risk-return profile of the bank portfolio. Financial institutions provide three transformation services
- Liability, asset and size transformation consisting of mobilization of funds and their allocation, (provision of large loans on the basis of numerous small or retail deposits).
- Maturity transformation by offering the savers the relatively short-term claim or liquid deposit they prefer and providing borrowers long-term loans which are better matched to the cash flows generated by their investment.
- Risk transformation by transforming and reducing the risk involved in direct lending by acquiring more diversified portfolios than individual savers can. While undertaking these transformation services banks incur risks, transform and embed them in banking products and services.
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