ABSTRACT
Basel enforces that financial organizations have a risk management strategy. Basel’s main focus is on creating regulation guidelines on “Standardization of Risk Management” for financial organizations, which are valid worldwide. These standards, aiming for a closer correspondence between the capital that banks hold and the risks they take, should lead to more stable, efficiently run financial organizations. Harmonization across all sectors in the financial industry is the focus of the Basel Committee on Banking Supervision, which aims to implement detailed disclosure requirements across all sectors. The Basel II Accord focuses on the goals of “Identify-Assess-Monitor-Control/Mitigate” and thus manage:
Credit risk
Market risk
Operational risk
These risks, as shown in Figure 3.1, affect all banks and other financial organizations, including insurance and brokers.
