A Synopsis Report on

RISK MANAGEMENT IN EQUITIES

AT

ICICI PRUDENTIAL LIFE INSURANCE

In partial fulfilment of the requirements for the award of the degree in

MASTEROFBUSINESSADMINISTRATION

Submitted By

M DHEERAJ

Hall Ticket No: 1312-20-672-179

Under the Guidance of

---------------------------------

Assistant Professor

MALLA REDDY INSTITUTE OF .MANAGEMENT

2020-2022

1.1 INTRODUCTION
Risk management occurs everywhere in the financial world. It occurs when an investor buys

low-risk government bonds  over more risky corporate bonds , when a fund

manager hedges his currency exposure with currency derivatives and when a bank performs

a credit check on an individual before issuing a personal line of credit. Stockbrokers use

financial instruments like options  and futures , and money managers  use strategies

like portfolio and investment diversification , in order to mitigate or effectively manage risk.

In the financial world, risk management is the process of identification, analysis and

acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management

occurs any time an investor or fund manager analyzes and attempts to quantify the potential

for losses in an investment and then takes the appropriate action (or inaction) given

his investment objectives and risk tolerance.

Risk management is designed to reduce or eliminate the risk of certain kinds of events

happening or having an impact on the business.

Definition of Risk Management

Risk management is a process for identifying, assessing, and prioritizing risks of different

kinds. Once the risks are identified, the risk manager will create a plan to minimize or

eliminate the impact of negative events. A variety of strategies is available, depending on the

type of risk and the type of business. There are a number of risk management standards,

including those developed by the Project Management Institute, the International

Organization for Standardization (ISO), the National Institute of Science and Technology,

and actuarial societies.

Types of Risk

There are many different types of risk that risk management plans can mitigate. Common

risks include things like accidents in the workplace or fires, tornadoes, earthquakes, and other

natural disasters. It can also include legal risks like fraud, theft, and sexual harassment
lawsuits. Risks can also relate to business practices, uncertainty in financial markets, failures

in projects, credit risks, or the security and storage of data and records.

Goals of Risk Management

The idea behind using risk management practices is to protect businesses from being

vulnerable. Many business risk management plans may focus on keeping the company viable

and reducing financial risks. However, risk management is also designed to protect the

employees, customers, and general public from negative events like fires or acts of terrorism

that may affect them. Risk management practices are also about preserving the physical

facilities, data, records, and physical assets a company owns or uses.

Process for Identifying and Managing Risk

While a variety of different strategies can mitigate or eliminate risk, the process for

identifying and managing the risk is fairly standard and consists of five basic steps. First,

threats or risks are identified. Second, the vulnerability of key assets like information to the

identified threats is assessed. Next, the risk manager must determine the expected

consequences of specific threats to assets. The last two steps in the process are to figure out

ways to reduce risks and then prioritize the risk management procedures based on their

importance.

Strategies for Managing Risk

There are as many different types of strategies for managing risk as there are types of risks.

These break down into four main categories. Risk can be managed by accepting the

consequences of a risk and budgeting for it. Another strategy is to transfer the risk to another

party by insuring against a particular, like fire or a slip-and-fall accident. Closing down a

particular high-risk area of a business can avoid risk. Finally, the manager can reduce the

risk’s negative effects, for instance, by installing sprinklers for fires or instituting a back-up

plan for data.

responsible company. Every company should have one. It will help to protect people as well

as physical and financial assets.

NEED OF THE STUDY

The idea behind using risk management practices is to protect businesses from being

vulnerable. Many business risk management plans may focus on keeping the company viable

and reducing financial risks. However, risk management is also designed to protect the

employees, customers, and general public from negative events like fires or acts of terrorism

that may affect them. Risk management practices are also about preserving the physical

facilities, data, records, and physical assets a company owns or uses.

OBJECTIVES:

● To study the investment decision process.

● To analyze the risk return characteristics of sample scripts.

● To ascertain Risk Management.

● To construct an effective portfolio which offers the maximum return for minimum

risk

SCOPE OF STUDY:
 This study covers the Markowitz model.  The study covers the calculation of

correlations between the different securities in order to find out at what percentage funds

should be invested among the companies in the portfolio. Also the study includes the

calculation of individual Standard Deviation of securities and ends at the calculation of

weights of individual securities involved in the portfolio.  These percentages help in

allocating the funds available for investment based on risky portfolios. The present study

covers risk management practices in hdfc bank which will be conducted for a period of 45

days.

1.4 RESEARCH METHODOLOGY:

secondary data. The primary data has been collected personally by approaching the online

share traders who are engaged in share market. The data are collected with a carefully

prepared questionnaire. The secondary data has been collected from the books, journals and

websites which deal with online share trading.

Secondary data : The secondary data collection method includes:

Websites

Journals

Text books

Method Used For Analysis of Study

The methodology used for this purpose is Survey and Questionnaire Method. It is a time

consuming and expensive method and requires more administrative planning and

supervision. It is also subjective to interviewer bias or distortion.

Tools & Techniques

 DTR ( Debtor's turnover ratio)

 ACP(Average Collection Period)

 NPA( Non performing Asset)


1.5 LIMITATIONS OF THE STUDY

1. The study is confined just to the foreign exchange risk but not the total risk.

2. The analysis of this study is mainly done on the income statements.

3. This study is limited for the year 2017-2021

4. It does not take into consideration all Indian companies foreign exchange risk.

5. The hedging techniques are studied only which the company adopted to minimize

foreign exchange risk.

6. Only two samples have been selected for constructing a portfolio.

7. Share prices of scripts of 5 years period was taken.