Risk Management in the Activity of Financial Institutions, In Conditions of Unstable Economic DevelopmentWorld Applied Sciences Journal

In this article, the authors examine risk management in the activity of financial institutions, in an unstable economic period. Research on risk management in the activity of financial institutions is becoming increasingly important for a variety of reasons. The financial crisis of 2008–2009 showed that a significant amount of the risks existing in the activity of financial institutions are not evaluated or are evaluated insufficiently. However, financial institutions operate successfully when the risks assumed by them are reasonable, controllable and are within their financial opportunities and competence. Assets (primarily loans) must be sufficiently liquid to cover any outflows, expenses and losses and still provide an acceptable profit margin for the members (shareholders). Today, the topic of a development strategy for risk management in financial institutions is a frequent and important subject of discussion. Within this subject, the most pressing issues are the implementation of Basel III, Directive Solvency II, defining the best practices and strategies for managing various risks, questions of choice and use of effective instruments to reduce the risks, as well as insurance of risks and use of stress testing.