Tuesday, April 23, 2019

Securitization and Swaps Essay Example | Topics and Well Written Essays - 3750 words

Securitization and Swaps - undertake ExampleHence the firms in the pecuniary services industry attach more importance to the luck of exposure management in their organizations. Risk management in the financial services organizations is necessitated due to various reasons. The to the highest degree important reason is the potential economic losses to which the firms will be exposed in eccentric they had to meet with some unforeseen risk and it may erode the entire cracking of the firm. There be other reasons for undertaking risk management in these firms like the tax implications of the transactions, movement in the capital and stock markets and the persistent fear of the people managing the financial services line of credites that their decisions may be proved untimely by the course of business events. In any risk being faced by the financial service firm there is the potential danger of the firm losing profits which in turn would impart in the decline of the firm value for some of the stakeholders. Similarly all or any of these reasons for managing the risk may force the management of the firm to make an assessment of the risks involved and take necessary disciplinal or preventive action to cheer the firm against the risks identified. In this article the different kinds of risks to which the financial institutions ar exposed and the ways in which the firms crumb protect them against these risks are discussed.The financial Methods to Protect against Risks The financial institutions follow several ways of protecting them against the risks associated with their businesses. In general the organizations can bob up out the go around business practices in the industry with respect to risk management and adopt them in their own organizations. Alternatively the organizations can find convenient ways of transferring the risks to other players in the market or the organizations can employ specialise risk management programs at their organizational level to protect them against any financial loss resulting from the risks.The best practices in the industry is the normally adopted risk management procedure by most of the organizations in which the organizations take actions like underwriting and reinsurance of risk so that the risks will be spread among the operators which have the effect of cut back the risks of apparent risks associated with the business. In addition the financial institutions may undertake hedging of their balance sheet items to protect any possible financial risks due to change in interest rates or supersede rates if the assets and liabilities are held in foreign companies. The basic objective behind these measures can be seen from the concomitant that the organizations do not want to carry the risks which are part of the businesses undertaken by them and also to maintain the level of total risks under controllable levels.There are systemic risks that can be eliminated by a proper assessment of the risks and t aking risk protection programs to safeguard the financial interests of the organizations. Similarly in the cuticle of risks that the organizations may face due to the frauds committed by the staff and employees, losses arising out of oversights and mistakes of the employees due to restrict control by senior level management - known as operational risks - the organizations can find suitable ways to minimize these risks. In any case it must be noted that the organizations would bear out from possible erosion of profits due to

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