Financial risks and risk management in the banking sector during uncertain period

Abstract

In 2020, the outbreak of COVID19-pandemic forced institutions, such as countries and corporations, to adapt to new operating circumstances. Two years after 2020, a war broke out in Europe, Ukraine, unprovokedly started by the Russian federation, which changed not only geopolitical and economic atmosphere in Europe but also worldwide. Due to these events, the author saw it necessary to investigate, how has the biggest bank of Northern Europe, Nordea Bank Abp, considered a changed atmosphere it has been operating in related to its risk management policy.

The objectives for the author were to examine, what risks did Nordea Bank Abp recognize during unstable period of time 2020-2022 and how did it manage the risks. The author wanted to see whether the COVID19-pandemic and the war in Ukraine made Nordea to adjust their hedging policy in order to survive as well as possible given the challenging, uncertain times.

The research was conducted almost fully utilizing qualitative information, given the nature of information provided by Nordea in its Capital and Risk Management Reports from the years 2020-2022. Although, some quantitative data was also utilized to supplement the results.

The information provided by Nordea showed that during the years 2020-2022, the recognized risk types and the methods of managing remained mostly identical. COVID19-pandemic was brought up multiple times by the bank, but the war in Europe was discussed only a little during the bank’s Capital and Risk Management Report 2022.

The information provided by Nordea showed multiple different recognized risk types and hedging methods, which from time-to-time beared resemblance to the author’s literature review. Also, the information suggested that the COVID19-pandemic significantly influenced Nordea’s risk management onwards 2020. However, despite being situated near an imperialistic, post-Soviet state attempting to annex a European country, Nordea has not had substantial tangible effects linked to its risk management due to the war in Ukraine, while the bank still has addressed the war.