Financial Risk Manager [FRM] Assignment Answers

Question 5: Answer the following questions.
a] In your chosen organization, explain what are the different types of businesses and financial risks faced by it in the conduct of normal business operations and the decisions involved in it?
b] What is meant by internal risk environment in an organization? Analyze the given situation below and provide your opinion as to what led to the failure of the said institution.

Case Study 1: Washington Mutual

• 2004 :Embarked upon a lending strategy to pursue higher profits by emphasizing high risk loans
• 2006 :High risk loans began incurring high rates of delinquency and default,
• 2007 :Mortgage backed securities began incurring ratings downgrades and began incurring losses due to a portfolio that contained poor quality and questionable customers. (Source: Wall Street and the Financial Crisis: Anatomy of a financial collapse began incurring losses due to a portfolio that contained poor quality and fraudulent loans and securities. Its stock price dropped as shareholders lost confidence and depositors began withdrawing funds, eventually causing a liquidity crisis at the bank)
• 2008: Seized by its regulator, the Office of Thrift Supervision (OTS) Placed in receivership with the Federal Deposit Insurance Corporation (FDIC) Sold to JPMorgan Chase for $1.9 billion.

Case Study 2 – Barings Bank

On February 26, 1995, Barings Bank (Barings) – the United Kingdom’s (UK) oldest and one of its most reputed banks – declared it was bankrupt. The bank with a total net worth of $900 mn had suffered losses in excess of $1 bn.
These losses were result of the gross mismanagement of the bank’s derivatives trading operations by Nicholas William Leeson (Leeson), the General Manager of Barings Future in Singapore (BFS).
BFS had been established to look after the bank’s Singapore International Monetary Exchange (SIMEX) trading operations. Leeson’s job was to make arbitrage profits by taking the advantage of price differences of similar contracts on the SIMEX (Singapore) and Osaka stock exchanges.      In spite of not having the authority, he traded in options and maintained un-hedged   position.   He acted beyond the scope of his job and was able to conceal his   unauthorized derivatives trading activities.
Due to the senior management’s carelessness and lack of knowledge of derivatives trading, the bank landed up in a major financial mess.
When Barings finally went into receivership on February 27, 1995, it had an outstanding notional futures position on Japanese equities and bonds of US$ 27 bn (US$ 7 bn on Nikkei 225 equity contracts and US$ 20 bn on Japanese government bond (JGB) and Euro yen contracts).
Analysts said that the situation demanded that banks the world over must tighten their internal control procedures.
c] Based on the above case study explain in your opinion the risk management instruments that could have been applied for avoiding a financial risk situation.
 [Total-30 marks]
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Assignment Brief
Word: 2000- 2500
Course: HND Business
Referencing Style: Harvard
Font: Times New Roman
Deadline: As Per Required
 
Task 1
LO 1: Explore and illustrate the range of venture types that might be considered entrepreneurial.
LO2: Assess the impact of SME businesses on the UK economy.
 
Vocational Scenario
You currently work for a consultancy firm that provides advice and market intelligence to small businesses and entrepreneurs. As a part of promoting the concept of small businesses and entrepreneurship, you have been tasked to prepare a report covering the following:

• ⁽¹⁾ Carefully examine the various types of entrepreneurial ventures and explain how they relate to the typology of entrepreneurship.
• ⁽²⁾ Explore the key similarities and differences between the different types of entrepreneurial ventures discussed in ⁽¹⁾ Also, investigate a diverse range of entrepreneurial ventures to demonstrate an understanding of entrepreneurship in both the public and corporate sector. In addition, critically examine the scope, development and growth of the different entrepreneurial ventures you have discussed
• ⁽³⁾ Using the information from government databases, collect, Interpret and assess relevant data and statistics to illustrate how micro and small businesses impact on the economy. Also, evaluate the key impact that small, medium and large businesses make to the economy
• ⁽⁴⁾ Explain the significance of small businesses and business start-ups to the growth of the social economy. Additionally, critically examine how small businesses have an impact on different levels of the economy (i.e. local, regional, national) and in an international context.

Task 2
LO3 Determine and assess the key aspects of an entrepreneurial mindset
Vocational Scenario
Continuing from Assignment 1, in your role at the consultancy firm you have been asked by the CEO to work with your colleagues to present on the topic ‘The Mindset of the Entrepreneur at the annual Business Start-up Show in London. You need to write a report that addresses the following requirements.
Requirements:

• ⁽⁵⁾ Determine the key characteristic traits and skills of successful entrepreneurs that differentiate them from other business managers. Also, explore and examine the different lines of argument in the literature relating to entrepreneurial characteristics.
• ⁽⁶⁾ Assess how aspects of the entrepreneurial personality reflect entrepreneurial motivation and mindset. In addition, analyse the characteristic traits, skills and motivational drivers of successful entrepreneurs, supported by specific examples of your choice.

Task 3
LO4 Examine the different environments that foster or hinder entrepreneurship
You need to write a report and produce power point slides to be presented in class, which address the following requirement.
The submission is in the form of a PowerPoint presentation slides and report. The presentation slides and speaker notes should be submitted as one copy. You are required to make effective use of PowerPoint headings, paragraphs and subsections as appropriate. Your research should be referenced using the Harvard referencing system. Please also provide a bibliography using the Harvard referencing system. The recommended word limit is 500 words +/- 10%, including speaker notes, although you will not be penalised for exceeding the total word limit.
Requirements:

• ⁽⁷⁾ Examine, using relevant examples, how background and experience can hinder or foster entrepreneurship. You may need to also consider analyzing the link between entrepreneurial characteristics and the influence of personal background and experience to specific successful entrepreneurs. Finally, critically evaluate how background and experience influences entrepreneurs, both positively and negatively, by comparing and contrasting examples.

Pass	Merit	Distinction
LO1 Explore and illustrate the range of venture types that might be considered entrepreneurial
P1 Examine different types of entrepreneurial ventures and explain how they relate to the typology of entrepreneurship.P2 Explore the similarities and differences between entrepreneurial ventures.	M1 Investigate a diverse range of entrepreneurial ventures to demonstrate an understanding of entrepreneurship in both the public and corporate sector.	D1 Critically examine the scope, development and growth of entrepreneurial ventures.
LO2 Assess the impact of small businesses on the economy
P3 Interpret and assess relevant data and statistics to illustrate how micro and small businesses impact on the economy.P4 Explain the importance of small businesses and business start-ups to the growth of the social economy.	M2 Evaluate the differences small, medium and large businesses make to the economy, applying relevant data and statistics.	D2 Critically examine how small businesses have an impact on different levels of the economy (local, regional, national) and in an international context.
LO3 Determine and assess the key aspects of an entrepreneurial mindset
P5 Determine the characteristic traits and skills of successful entrepreneurs that differentiate them from other business managers.P6 Assess how aspects of the entrepreneurial personality reflect entrepreneurial motivation and mindset.	M3 Explore and examine different lines of argument relating to entrepreneurial characteristics.	D3 Analyse the characteristic traits, skills and motivational drivers of successful entrepreneurs, supported by specific examples.
LO4 Examine the different environments that foster or hinder entrepreneurship
P7 Examine, using relevant examples, how background and experience can hinder or foster entrepreneurship.	M4 Analyse the link between entrepreneurial characteristics and the influence of personal background and experience to specific successful entrepreneurs.	D4 Critically evaluate how background and experience influences entrepreneurs, both positively and negatively, by comparing and contrasting examples.

 
Appendix A: Plagiarism and Collusion:
Any act of plagiarism and collusion will be seriously dealt with according to the regulations. In this context the definition and scope of plagiarism are presented below:
“Using the work of others without acknowledging source of information or inspiration, although you may paraphrase, the result is still plagiarism” (Cortell, 2003). Please ensure you apply in-text referencing within your assignment to support all information extracted from any published work.
Collusion is when two or more people combine to produce a piece of work for an assessment that is passed off as the work of one alone. For example, one student has copied the work of another, or where a joint effort has taken place in producing what should have been an individual effort.
 
Appendix B: Harvard Referencing System (HRS):
Any information that is not of your own needs to be referenced, plagiarizing from someone else’s work can be unintentional if you are unaware of the rules of acknowledging and referencing direct quotations.
The Harvard system requires you to acknowledge certain information that is mainly the surname and the year of publication within the text, for example:
According to Bell (1999) – as you write up your assignment you will use a citation to indicate in your text the source of information provided.
The authors and publication information cited within the main body of your work must be listed in the reference list (This will be at the end of your assignment) for example:

 

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