Financial Risks Of The Financial Risk Of Companies Listed Onthe Securities Market Essay

The idea of “risk” is used in many fields and industries. There has been large efforts made towards the understanding of risk. Since, risk varies so much depending on the field of study, the need for learning about it is warranted. As can be imagined, the importance of risk in a market economy is crucial. In the 1990s, JP Morgan made the Value at Risk (VaR) a central component of its work efforts (Cecilia-Nicoleta, Anne-Marie, & Carmen-Maria, 2011).

The collapse of Lehman Brothers, a sprawling global bank, in September 2008 almost brought down the world’s financial system. Considered by many economists to have been the worst financial crisis since the Great depression of the 1930s. Economist Peter Morici coined the term the “The Great Recession” to describe the period. While the causes are still being debated, many ramifications are clear and include the failure of major corporations, large declines in asset values (some estimates put the drop in the trillions of dollars range), substantial government intervention across the globe, and a significant decline in economic activity. Both regulatory and market based solutions have been proposed or executed to attempt to combat the causes and effects of the crisis.

Risk is defined as the probability that a company will become insolvent and will not be able to meet its obligations when they become due for payment. The profitability versus

The banking crisis of the late 2000s, often called the Great Recession, is labelled by many economists as the worst financial crisis since the Great Depression. Its effect on the markets around the world can still be felt. Many countries suffered a drop in GDP, small or even negative growth, bankrupting businesses and rise in unemployment. The welfare cost that society had to paid lead to an obvious question: ‘Who’s to blame?’ The fingers are pointed to the United States of America, as it is obvious that this is where the crisis began, but who exactly is responsible? Many people believe that the banks are the only ones that are guilty, but this is just not true. The crisis was really a systematic failure, in which many problems in the

In 2008, a number of Banks, Financial Institutions and Non-Financial institutions failures sparked Financial Crisis or as some economist call “The Great Recession” that efficiently froze the entire world Financial institutions,

The last decade has been a period of much economic reform for individuals, institutions and societies alike. With increasing rates of globalization, financial markets and foreign trade have been a direct beneficiary of the free market, thus resulting in an interlinked and a rather interdependent global economy. Despite this advantage, the opportunity for failure loomed as human error and ill-conceived economic regulations became more frequent in some of the world 's most sophisticated economies. This loophole in the global economy resulted in the greatest economic downfall of the modern era since the Great Depression of the 1930’s, the 2008 Global Financial Crisis (GFC). Foster (2010, p.54) defines the financial collapse as a “crisis that started in the US mortgage market when massive numbers of mortgage defaults threatened the ability of the United States and global financial institutions to service their debts. Their consequent inability to lend led to a recession in the United States and many other countries, and increased the likelihood of a meltdown of the global financial system”. Despite the rarity of financial crises, they are considered cyclical, mirroring the trends of a business cycle, thus are able to reoccur if wrong financial regulations are implemented and lack of control is exercised on economic activity. As many economists today examine the crisis, it is widely concluded that there were collective causes and effects, both immediate and longstanding, of the

Increasing global connectivity and integration in today’s world ensures that almost any serious problem has worldwide ramifications. The global financial system can serve as a key example of this phenomenon. Very recently, Britain’s fifth-largest mortgage lender Northern Rock was rescued by emergency funding from the Bank of England. This made the Newcastle-based firm the highest profile UK victim of the global credit crunch that had been triggered by the sub-prime mortgage crisis in the US. The bank run on Northern Rock that followed was unprecedented in recent UK monetary history. The Overend Guerney crash of 1866 was the last recorded bank

Finance is the study of applying specific value to things we own, services we use and decisions we make. Financial management is the process for and the analysis of making financial decisions in the business context. The major subareas of finance are investments, financial management, financial institutions, market, and international finance. Risk is a potential future negative impact to value and or cash flow. It is often discussed in terms of probability of loss and the expected magnitude of the loss.

Market risk is the risk associated with an investors day to day investments, that are affected by constant fluctuations in the markets. With investment banking, a banks reputation is a critical in its success, reputational risk describes the trustworthiness of a business. A firm with a poor reputation will not get as much business, meaning a bad reputation results in a loss in revenue. Concentration Risk is the risk showing the spread of a banks’ accounts to various debtors to whom the bank has lent to. The Basel II accord stated that ‘operational risk is the risk of loss resulting from inadequate or failed internal processes, people and systems, or from external events’. This risk covers the very wade basis of a company’s operations, there are many different factors involved here: people, employees actions and company processes.

Just after ten years of Asian financial crisis, another major financial crisis now concern for all developed and some developing countries is “Global Financial Crisis 2008.” It is beginning with the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and spread like a flood. At first U.S banking sector fall in a great liquidity crisis and simultaneously around the world stock markets have fallen, large financial institutions have collapsed or been bought out, and governments in even the wealthiest nations have had to come up with rescue packages to bail out their financial systems. (Global issue)

A collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies have had a ripple effect around the world. Furthermore, other weaknesses in the global financial system have surfaced. Some financial products and instruments have become so complex and twisted, that as things start to unravel, trust in the whole system started to fail.

The purpose of the review is to inform the reader about the possible dangers geopolitical risks might have on the financial industry when the industry does not look after them. I was intrigued by this dark side of modern communication and the effect it has on the safety of the banking sector.

Financial crisis is initiated in a number of ways which include “mismanagement of financial liberalization or innovation, asset price booms and busts, or a general increase in uncertainty caused by failures of major financial institutions” (Mishkin & Eakins, 2012, p.164). There are structural underpinnings to several financial crises including the one in 2008/09.

Risk management is an activity which integrates recognition of risk, risk assessment, developing strategies to manage it, and mitigation of risk using managerial resources. Some traditional risk managements are focused on risks stemming from physical or legal causes (e.g. natural disasters or fires, accidents, death). Financial risk management, on the other hand, focuses on risks that can be managed using traded financial instruments. Objective of risk management is

According to the work examined in this study the global recession that occurred in 2008 and 2009 was partially a result of the financial industry's failure to be responsible for the decision it made in using financial instruments that were risk and very complex in nature. The culture of corporations were constructed on risk-based rewards instead of rewards that resulted in value for stakeholders. The financial risks that banks took on were not well comprehended by the public or regulators and the mass media also failed to understand the risks that the banks had entered into with certain financial agreements.