Financial Awareness - Risk, Stability & Emerging Finance
Which of the following is NOT a common tool used by banks for risk management?
Which of the following is NOT a common tool used by banks for risk management?
medium Q14 of 15
Step-by-Step Solution
Step 1: Understand risk management tools
Banks use various tools like diversification, exposure limits, and capital adequacy to manage risks effectively.Step 2: Analyze the options
Diversification reduces concentration risk; exposure limits control risk exposure; capital adequacy ensures buffer against losses. Ignoring NPAs is not a risk management tool but a risky practice.Final Answer:
Ignoring non-performing assets → Option AQuick Check:
Ignoring non-performing assets = correct ✅
Quick Trick: Never ignore NPAs; they increase risk exposure.
Common Mistakes:
- Assuming ignoring NPAs is a risk management strategy.
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