Business risk is understood as the risk of incurring losses due to adverse changes in the business environment, making bad decisions, the incorrect implementation of decisions made, or not taking appropriate actions in response to changes in the business environment; it includes in particular strategic risk.
The objective of business risk management is to maintain on an acceptable level, the potential negative financial consequences resulting from adverse changes in the business environment, making adverse decisions, improper implementation of adopted decisions or lack of appropriate actions, which would be a response to changes in the business environment.
Measurement of business risk is aimed at defining the scale of threats related to the existence of business risk with the use of defined risk measures.
The measurement of business risk comprises:
- calculation of selected business risk indicators,
- conducting stress tests,
- calculation of internal capital.
The main tools used in business risk management in the Bank include:
- procedures for business risk management,
- limits and thresholds for business risk.