Future Risk Analysis for Bank Investments using PROMETHEE

Abstract

Professional management of financial activities requires a good understanding of the inherent future risks of those activities. Despite the use of complex models for this purpose, significant risks often remain under-appreciated. This article develops techniques that will assist banking institutions at understanding the risks involved in micro-finance and related operations. The analysis is carried out by identifying financial operations that are typical of banking on a smaller scale, such as investing and extending credit, and the types of risk inherent in these activities, which are then grouped into the categories of operational risk, financial risk, management risk, and external risk. Analysis is conducted using the PROMETHEE multi-criteria decision methodology. Based on our new approach to risk analysis, many institutions will improve the management of their financial operations, including micro-finance.