A

**1

Credit Risk:**

Sampath Bank faces credit risk, primarily associated with the potential default of borrowers

The bank's loan portfolio, although managed conservatively, may be impacted by economic downturns, industry-specific issues, or adverse changes in borrower financial conditions, affecting the bank's asset quality and profitability.

B

**2

Market Risk:**

Market risk arises due to fluctuations in interest rates, exchange rates, and other financial instrument prices

Sampath Bank's exposure to interest rate risk, especially in its investment portfolio, may lead to valuation losses

Additionally, currency exchange rate movements can impact the value of foreign currency-denominated assets and liabilities.

C

**3

Liquidity Risk:**

The bank faces liquidity risk, which is the potential inability to meet its short-term financial obligations

Unforeseen withdrawals, a sudden decline in deposits, or difficulty in accessing funding sources could strain the bank's liquidity position

Effective liquidity management is crucial to mitigate this risk.

D

**4

Operational Risk:**

Operational risk arises from internal processes, systems, human factors, and external events

Sampath Bank is exposed to operational risk in areas such as technology failures, fraud, legal and regulatory compliance, and disruptions to its business operations

Adequate risk management and controls are essential to minimize operational risks.

E

**5

Compliance and Regulatory Risk:**

Sampath Bank operates in a highly regulated environment, and changes in regulations or non-compliance with existing ones pose regulatory risk

Adherence to evolving regulatory requirements, both domestically and internationally, is vital

Failure to comply may result in financial penalties, reputational damage, or restrictions on operations.