Never Put All Of Your Eggs Into One Basket Ȃ An Overview Of The Most Important Issues Referring To Concentration Risk

The aim of this work is to present in a synthetic way the most important issues referring to concentration risk, especially to the credit concentration risk in banking. In view of the very broad scope of the term “concentration risk”, various definitions and subtypes of it will be presented at the beginning. In the next section, the basics of a properly established risk management in financial institutions will be presented, which also applies to this risk. In the case of risk management, a reliable measurement of its height is essential. The fourth part is devoted to it. The study results show that the risk of concentration, especially in banking, is probably the most important type of risk that requires the use of sound risk management process, because when managed improperly, the stability of the institution is at stake. The last part contains a list of key external policies and guidelines relating to concentration risk. The article uses the method of analysis of available publications – articles, guidelines and regulations - available in the field.