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1 February, 10:53

5. Describe two risks involved in banking, and explain how banks can protect against those risks. (2

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  1. 1 February, 13:48
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    The two risks are liquidity risk and market risk.

    Explanation:

    The liquidity risk is the risk that the company will not be able to refinance its liability and this is the most important risk for the banking sector. The financial health of the organization when get worsen the company finds it impossible for it to refinance its liabilities. This has greater effects on the organization's operations.

    The market risk is the risk due to the losses of the bank's trading and this is because the interest has moved un favorable in the country in which the bank is operating. The risk also includes its investment in forex, stocks, etc.
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