A study on Risk management Altman Z Score: A Tool to Measure Credit Risk

Risk is the fundamental element that drives financial behavior. Risk management is an activity which integrates recognition of risk, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. The future of banking will undoubtedly rest on risk management dynamics. The effective management of credit risk is a critical component of Comprehensive   risk management essential for long-term success of a banking institution.  Objective of paper is to make an attempt to identify the risks faced by the banking industry and the process of risk management. For the purpose of the study two companies are taken as sample Maruthi Suziki and GMR infra. Further data has been collected from two companies and secondary sources i.e., from Books, journals and online publications, identified various risks faced by the banks, developed the process of risk management and analyzed different risk management techniques. Altman z score is applied to test credit worthiness of company.  It can be concluded from the study that the banks take risk more consciously, anticipates adverse changes and hedges accordingly; it becomes a source of competitive advantage, and efficient management of the banking industry.