Strategic risk is the risk of losses of the credit organization as a result of mistakes made (imperfections) in taking decisions defining the strategy of the bank’s activity and development (strategic management) and resulting non-consideration or insufficient consideration of possible threats to the bank’s activity, inadequate or insufficiently substantiated definition of prospective business lines where bank could gain advantage over its competitors, absence or incomplete provision of necessary resources (financial, material and technical, human) and organizational measures (managerial decisions) that must provide the achievement of strategic objectives the credit organization.
The major goal of strategic risk management is to maintain the risks taken by the bank at levels determined in accordance with its strategic tasks and to ensure safety of assets and capital by minimization of possible losses.
The bank uses the following methods of strategic risk management:
- business planning;
- financial planning;
- monitoring of approved plans implementation;
- market analysis;
- readjustment of plans.