Paper Example on Particular People Risks Associated With a Bank

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George Washington University
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Reputation risk is a probable loss of the organizational capital. Just like any other brand, Wells Fargo & Company have faced some reputation risk triggered by its activities or critical decision made during critical situations. Every move that the bank take is at the end rated by its customers, investors and other stakeholders (Adam, William, Kevin Peter 2016). For example, last year, the organization experience reputation risk due to phony accounts whereby employees secretly created unauthorized millions of illegal bank and credit accounts without customers consent (Tayan, 2016).

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Specific Financial Risks

Many risks come with Wells Fargo & Company that can cause the bank to run bankrupt and they include liquidity, credit and operational. For instance, Credit risk Wells Fargo & Company is the probability that the bank-borrower will not meet the obligations by the agreed terms. Credit risk probably caused by loans, bonds, guarantees financial futures among others. The bank might face a credit risk if an individual, for example, borrows a loan and is not capable of repaying back due to a loss of businesses, death, low income or any other reason that might arise. Liquidity risk is another people risk which is experienced. As a result lack of marketability of investment which cannot be purchased quickly to reduce loss. For example, look at a risk whereby an individual goes to the bank to withdraw money only to find out that the bank does not have enough money

The organization also experiences market risk since it has trading activities that assume the risk for market volatility. Any crash in the market can result in loss bank trading books. Market risk can be divided into three types reliant on the probable cause of the risk. The bank can experience a loss as a result of a fluctuation in interest rates. There is also currency risk as a result of changes in international currency rates. Lastly, there is equity risk which is associated with fluctuation in stock prices (Adam, William, Kevin Peter 2016).

Specific Operational Risk

Operation risk is the risk of loss as a result of failed internal processes, employees, or internal or external events. In Wells Fargo & Company, operations risk can be experienced as a result of human mistakes, for instance, inaccurate information filled in during check clearance. Also, just like any other Bank, Wells Fargo & Company experiences white collar crimes and robberies. These type of crimes involves violation of trust and do not rely on the use physical force. This kind of crimes can negatively affect the organization and shock families by erasing their live savings (Adam, William, Kevin Peter 2016).

How Risks Might Be Avoided or Mitigated

Wells Fargo & Company should do its best to determine the probability that the customer will repay back the loan. The bank should understand the client carefully regarding their incomes, security guarantors among another thing that aims at understanding the customer better. To mitigate operational risk, the organization should implement more strict internal rules and accountability can be the answer (Adu-Gyamfi,2016). The company can also foster a sense of unity among employees to lessen the temptation of going against the rules. To manage liquidity risk, the bank should reduce market shocks as well as the lock for excellent arbitrage opportunities. To achieve this, the organization should analyze the impacts of changes in cost and liquidity. The bank should also gain a centralized view of its liquidity through integration market information and portfolio updates to quickly assess the expected returns against fluctuations of the market (Schroeck,2002).


Adam B., William H., Kevin L., Peter A (2016). SMIF Investment Research Wells Fargo & Company (WFC). Retrieved From

Adu-Gyamfi, M. (2016). The overview of risks facing the International Banking System. Journal of Insurance and Financial Management, 1(2).

N.J: John Wiley.

Schroeck, G. (2002). Risk management and value creation in financial institutions. Hoboken,

Tayan, B. (2016). The Wells Fargo Cross-Selling Scandal. Retrieved from

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