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By introducing the important concepts in risk management and giving a broad overview of the field of financial risk management, the paper sets the scale for two basic objectives: 1. Measuring first the extent of Palestinian Banks familiarization with the issues of financial risks and if they apply to the Palestinian Banks. 2. Familiarise with the proven measures, management mechanics and procedures built in the banking management systems and the extent of use to benefit the risk management efforts. The methodology adopted for achieving the targeted objectives heavily relied on field investigation through reciprocal interviews with a cross sectional representation of the various operating banks in Palestine. To obtain accurate data as can be achieved a pre-determined questionnaire is put to use. Various aspects of the questionnaire addressed various risk issues. The responses gave the level of attendance built in the banks systems of management. The study shows that the banks in Palestine are lacking and have poor risk management system for monitoring, measuring, and mitigating risks. There is no department or committee responsible to identify, monitor, and manage financial risks. Most banks do not have formally written approved and circulated work policies and procedures. The study identifies that banks established a relatively good risk management process related to credit department such as loans approval, loan ceilings and loan default‘s follow up. The study identify that bank management has a responsibility for forecasting and quantifying risks and report such forecasts in their periodical reports. The periodical major reports produced by banks touch on credit risk report, liquidity report and foreign exchange. The study also shows that banks in Palestine lack adequate instruments for managing risk faced, though banks identify and employ certain controls over their operation, which are mostly observed by internal auditors. This is achieved by review, verification and validation of, contingency plans against loan risks defaults however, the study reveals that there is a total lack of separation of duties yet banks have clear data back –up and files under good use and control.
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