The Value Of Risk Management Essay example Example For Students

The Value Of Risk Management Essay example Whether it is investing, driving or just walking down the street, everyone exposes himself or herself to risk. Risk is present when future events occur with measurable probability whereas uncertainty exists when the likelihood of future events is indefinite. Expected loss and variability around the expected loss are two common terms that we normally use to describe risk. Although there are consequences associated with it, a rational person will only take the risk if the benefits exceed the cost. In a business risk management, shareholder diversification results in reduction of risk as it potentially substitutes for corporate risk management and insurance. Diversification is somewhat similar to what insurer will do as both of them pool investments to amortize risk. The objective of corporate risk management is to maximize shareholders’ value. The valuation model that is used to assist managers in making investment decisions is simply the value of any investment calculated by su mming its future cash flows discounted at an appropriate rate. Opportunity cost, which is equal to the expected return of an alternative investment having the same risk, is one of the components of cost of capital. Similarly, it is also equivalent to the sum of return on risk free securities and expected return for risk. Riskier cash flows indicate higher risk premium but investors can diversify their risk by dividing the cash flow risk into two components – diversifiable risk and non-diversifiable risk. We will write a custom essay on The Value Of Risk Management example specifically for you for only $16.38 $13.9/page Order now Risk premium only depends on non-diversifiable risk, which is also commonly known as systematic risk. Also, the total risk of cash flows can be calculated by summing both the diversifiable and non-diversifiable risk. Diversifiable risk does not affect cost of capital but non-diversifiable risk increases cost of capital. Insurance usually lowers diversifiable risk. Hedging and insurance that decrease systematic risk will reduce the opportunity cost of capital. Nevertheless, the counterparty that yields additional systematic risk will demand compensation for bearing the risk because the systematic risk must be borne by someone. However, the cost of paying the counterparty will cause the expected cash flows to fall thus shifting systematic risk. Consequently, opportunity cost of capital and expected cash flows will decline unless all parties value the cost of bearing systematic risk equally, then the two effects will balance each other and thus, the firm value will not change. Risks can be categorized in various ways based on purposes. Market risk, credit risk and operational risk are three categories of risk used in Risk Management. Market risk, which is often hedged with derivatives, occurs when market prices change in a given direction. Credit risk is a risk that a counterparty to a financial contract is unable to realize its obligations under the contract and can be hedged with credit derivatives. On the other hand, the operational risk or sometimes called as pure risk, is a risk that summarizes the risks a firm undertakes when it attempts to operate within a given field or industry. Comparatively, pure risks can be large relative to business resources and has minimal opportunity for gain to the enterprise. However, the main problem nowadays is the liquidity risk, which is a risk that a firm will not have sufficient cash to cover its current financial obligations and will become insolvent, especially when credit is not available. Besides, there is also a risk ultimately borne by shareholders which is the risk associated with the values of assets and liabilities where the value of capital is the difference between assets and liability. Loss control, loss financing and internal risk reduction are three methods of managing risks. There are numerous techniques by which risk exposures may be controlled. For instance, risk prevention technique concentrate on reducing the frequency o f losses while risk reduction technique is associated with reducing the severity of a loss when it occurs. Besides that, hold harmless and indemnity agreement are also one of the effective methods to transfer risk between two parties. The hold harmless agreement occurs when the indemnitor agrees to hold the indemnitee harmless from tort liability arising out of the indemnitor’s negligent act or omission. .u51b73cd2ed898ba7bb5dba82aa6d907f , .u51b73cd2ed898ba7bb5dba82aa6d907f .postImageUrl , .u51b73cd2ed898ba7bb5dba82aa6d907f .centered-text-area { min-height: 80px; position: relative; } .u51b73cd2ed898ba7bb5dba82aa6d907f , .u51b73cd2ed898ba7bb5dba82aa6d907f:hover , .u51b73cd2ed898ba7bb5dba82aa6d907f:visited , .u51b73cd2ed898ba7bb5dba82aa6d907f:active { border:0!important; } .u51b73cd2ed898ba7bb5dba82aa6d907f .clearfix:after { content: ""; display: table; clear: both; } .u51b73cd2ed898ba7bb5dba82aa6d907f { display: block; transition: background-color 250ms; webkit-transition: background-color 250ms; width: 100%; opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #95A5A6; } .u51b73cd2ed898ba7bb5dba82aa6d907f:active , .u51b73cd2ed898ba7bb5dba82aa6d907f:hover { opacity: 1; transition: opacity 250ms; webkit-transition: opacity 250ms; background-color: #2C3E50; } .u51b73cd2ed898ba7bb5dba82aa6d907f .centered-text-area { width: 100%; position: relative ; } .u51b73cd2ed898ba7bb5dba82aa6d907f .ctaText { border-bottom: 0 solid #fff; color: #2980B9; font-size: 16px; font-weight: bold; margin: 0; padding: 0; text-decoration: underline; } .u51b73cd2ed898ba7bb5dba82aa6d907f .postTitle { color: #FFFFFF; font-size: 16px; font-weight: 600; margin: 0; padding: 0; width: 100%; } .u51b73cd2ed898ba7bb5dba82aa6d907f .ctaButton { background-color: #7F8C8D!important; color: #2980B9; border: none; border-radius: 3px; box-shadow: none; font-size: 14px; font-weight: bold; line-height: 26px; moz-border-radius: 3px; text-align: center; text-decoration: none; text-shadow: none; width: 80px; min-height: 80px; background: url(https://artscolumbia.org/wp-content/plugins/intelly-related-posts/assets/images/simple-arrow.png)no-repeat; position: absolute; right: 0; top: 0; } .u51b73cd2ed898ba7bb5dba82aa6d907f:hover .ctaButton { background-color: #34495E!important; } .u51b73cd2ed898ba7bb5dba82aa6d907f .centered-text { display: table; height: 80px; padding-left : 18px; top: 0; } .u51b73cd2ed898ba7bb5dba82aa6d907f .u51b73cd2ed898ba7bb5dba82aa6d907f-content { display: table-cell; margin: 0; padding: 0; padding-right: 108px; position: relative; vertical-align: middle; width: 100%; } .u51b73cd2ed898ba7bb5dba82aa6d907f:after { content: ""; display: block; clear: both; } READ: Risks Of A Risk Management Program EssayAlthough quite similar with the hold harmless agreement, an indemnity agreement is an arrangement when one party agrees to pay the other party for any damages regardless who is at fault. Additionally, the party who holds harmless another party is commonly required to purchase insurance or obtain a letter of credit. In vicarious liability, principal is liable for the damages caused by an agent while performing duties for the principal. Rationally, this gives principal incentives to choose agents wisely. The difference between an employee and an independent contractor is that if a person performs services that can be controlled by an e mployer, then that person is not an independent contractor. Legally, employers are not vicariously liable for their independent contractors but with certain exceptions made today, employers can use it to hold them liable. As risk imposes a lot of costs on business and individuals, tradeoffs must be made. Large losses, which are one of the components of cause of risk, can affect indirect losses. Hence, reducing the probability of large losses can lessen indirect losses. Therefore, managers need to consider reduction in expected indirect losses when making risk management decisions. Diversification also has an effect on both direct and indirect losses. Although expected direct losses does not change when diversification occurs, expected indirect losses decreases when diversification occurs because it reduces the maximum probable loss. Insurance involves paying a premium to the insurer, which consists of pure premium and premium loading. However, insurance is actually a tradeoff for corporations. If a firm is not insured, then there will be an increase in the likelihood of having to raise a new capital. Although raising external capital is costly, if uninsured loss exceeds available internal funds, company can issue equity or borrow against future cash flows to pay the loss if it occurs. Hence, managers must compare premium loading to the expected cost of raising new funds when deciding whether to purchase insurance. Besides, insurance also decreases the likelihood of bankruptcy. Probability of bankruptcy adversely affects the terms at which other claimants contract with the firm. Claimants might require compensation for the expected costs that they would incur if the firm went bankrupt. Other claimants require compensation for the risk of financial distress because they are risk averse and not diversified. Hence, it can be seen that insurance improved the contractual terms between the insurance company and the firm. By decreasing the likelihood of financial distress, the contractual terms with other claimants can be improved and investment incentives of owners of firms may result in underinvestment or overinvestment. Incentive to pass up good projects is considered as underinvestment while incentive to adopt risky bad projects is considered as overinvestment. Buying insurance can decrease the likelihood of financial distress. It decreases the likelihood of underinvestment and overinvestment problem in risky assets. Moreover, insurance also helps to reduce expected tax payments because taxes on earnings with insurance are less than expected taxes without insurance. A firm will have a lower taxable income when tax rate is high and increase taxable income when tax rate is low. Essentially, insurance transfers income to years when firm is taxed at a lower rate. However, it does have an effect on financial accounting. Firms will have more volatile reported income and balance sheet numbers. Less volatility might make assessing managers easier. Above all, by diminishing diversifiable risk, the firm does not only lessen risk for diversified shareholders but also increases shareholder value by reducing the costs of obtaining services and expected tax payments. Management compensation contracts, market for corporate control, monitoring shareholders with large stakes and major creditors may be the several factors that would be expected to motivate managers to maximize shareholder value. But major creditors only rely on the credit rating agencies to monitor the creditworthiness of bonds and similar securities issued by firms. In order to issue bonds and other securities, firms have them rated by one of the three rating agencies – Standard Poor’s, Moody’s or Fitch. However, these rating agencies have done a very poor job and have been driven by profits and a divergence of interest only.

Free Essays on Aztec History

Since the Aztec city of Tenochtitlan had not many building materials like wood or stone, the Aztecs conquered other people and obtained prisoners to sacrifice as part of their religion. An Aztec soldier was not more popular if he killed many enemies in battle but if he captured prisoners. The Aztecs believed strongly in their religion and that was their goal in life. They prayed to more than 1’600 different gods, each having different roles for the world. The Aztecs believed that the gods were always watching over the earth and controlled the environment and life; like disease, crop growth the rain and the sun, they strongly believed in keeping the gods in their favour so they made sacrificial rituals. Idols of these many gods were worshipped at home in shrines as well as huge ceremonies being performed on huge stone pyramids. These ancient rituals included singing, dancing, drama and feasts as well as the offerings to the gods. The Aztecs thought that the gods had given the ir own blood to make life on earth, so the people believed that for help and protection they offered human blood and hearts. (Picture above right: Symbols of Mexico) www.pbs.org†¦venture1/pop-eaglesign.htm and picture above left www.fix.net/~cruz/mexico.html) The captives would be taken to the top of the highest pyramids and priest wearing bright coloured feather capes would stretch the prisoner’s body on a stone platform and cut his heart out with a flint knife; offering the still beating heart to the gods and the corpses would be thrown off the pyramid. The arms and legs of the victim would be given to the captor as a reward and their skulls would be posted on stakes. Above is the symbol of Mexico. While the ancient Aztecs were still nomads and living in swampy areas the priests received a vision from the gods. In this vision, the Aztec god, Huitzilopochtli, told them to look for a place to settle where they saw an eagle perched on a cactus, eatin... Free Essays on Aztec History Free Essays on Aztec History Since the Aztec city of Tenochtitlan had not many building materials like wood or stone, the Aztecs conquered other people and obtained prisoners to sacrifice as part of their religion. An Aztec soldier was not more popular if he killed many enemies in battle but if he captured prisoners. The Aztecs believed strongly in their religion and that was their goal in life. They prayed to more than 1’600 different gods, each having different roles for the world. The Aztecs believed that the gods were always watching over the earth and controlled the environment and life; like disease, crop growth the rain and the sun, they strongly believed in keeping the gods in their favour so they made sacrificial rituals. Idols of these many gods were worshipped at home in shrines as well as huge ceremonies being performed on huge stone pyramids. These ancient rituals included singing, dancing, drama and feasts as well as the offerings to the gods. The Aztecs thought that the gods had given the ir own blood to make life on earth, so the people believed that for help and protection they offered human blood and hearts. (Picture above right: Symbols of Mexico) www.pbs.org†¦venture1/pop-eaglesign.htm and picture above left www.fix.net/~cruz/mexico.html) The captives would be taken to the top of the highest pyramids and priest wearing bright coloured feather capes would stretch the prisoner’s body on a stone platform and cut his heart out with a flint knife; offering the still beating heart to the gods and the corpses would be thrown off the pyramid. The arms and legs of the victim would be given to the captor as a reward and their skulls would be posted on stakes. Above is the symbol of Mexico. While the ancient Aztecs were still nomads and living in swampy areas the priests received a vision from the gods. In this vision, the Aztec god, Huitzilopochtli, told them to look for a place to settle where they saw an eagle perched on a cactus, eatin...

6 Ways to Cope with Tax Season at Work

6 Ways to Cope with Tax Season at Work Nobody likes the anxieties of tax season (is a dog considered a dependent or what?), but as Mark Twain’s ghost reminds us from beyond the grave, the only thing more certain than taxes is death. Bottom line: we’re stuck with it. That doesn’t mean you can’t make it a more fun season around the office. See if anyone else shares your pain and denial.Decorate the W-2 you get from Accounting.Flirt with a coworker in the hopes that you’ll be able to file as â€Å"married† next year.Make it rain in the break room when you finally get your refund.Make sure everyone knows you’ve done your civic duty.

Assessment and Measurement Personal Statement Example | Topics and Well Written Essays - 500 words

Assessment and Measurement - Personal Statement Example ying to the JMU’s Assessment and Measurement Doctoral program hoping to enjoy such an enriching academic experience that will enable me to graduate as a global citizen. I am particularly interested in studying Assessment and Measurement at the JMU because of the program’s vision of preparing graduates that meet the increasing require need for quality assurance and accountability not only in education but other sectors such as business, healthcare etc. the programs goals of preparing quality graduates through extensive training that combines both theory and practical, conducting high quality scholarship that enhances knowledge for effective practice and providing services that promote professionalism in assessment & measurement attract me to be part of the JMU community. I hope to graduate from the program equipped with skills in designing assessment strategies, performing empirical investigations of new assessment techniques, analysis of empirical data, proper use of assessment outcomes, appropriate strategies to communicate assessment to different audience types and appropriate response to current & new measures of assessment as the world c ontinues to evolve. Currently I hold a bachelors degree from the Kind Khalid University- College of Education specializing in mathematics and a Master’s degree from the University of King Saud in Statistics. I also have an extensive work experience in public service. I also poses professional certification in project management. I have worked as a consultant with the Institute of Public Administration and the ministry of service since September, 2013. I am also a member of the training team at the IPA, have worked with the Ministry of Education since the year 2004 and statistician at the King Saud University. Given my extensive work as a teacher and trainer with different groups as well as educational background in mathematics & statics as well as professional certification in project management I believe I have the

Helping Behaviour And Human Rights Essay Example | Topics and Well Written Essays - 500 words

Helping Behaviour And Human Rights - Essay Example In a study of social science students, they were reported to have strong "just world" beliefs, and that these values were directly impacting on their motivations to help elderly persons with socio-economic and health care needs (Maclean & Chown, 1988). A cross-cultural study using British and Canadian participants, it was found that they tended to dismiss the needs and expectations of elderly clients as a ay to better service the greater need of the community. The proposed study aims to provide a qualitative perspective of helping professional attitudes among undergraduate psychology students in the UK. Using a focus group, the primary investigator aims to extend current understandings of the beliefs, values and attitudes of helping profession students who will be interacting with the elderly in their future careers. Eight undergraduate psychology students from the University of will be recruited using snowball sampling (i.e., by word of mouth). The sample will be stratified across gender and ethnicity to reflect the diversity present in the wider population of psychology students. Informed consent will be obtained to enable participation. No incentives will be given for participation. A tape recorder, with spare batteries and notepaper and pens will be required by the prima

Why Did He Do It? :: essays research papers fc

What would you do, or how would you feel, if a man of middle-eastern descent came up to you telling you that he had been a victim of a hate crime where he was attacked from behind, beaten and pelted with eggs while his assailants uttered racial epithets, but later was notified that it was all a lie, a hoax? Well, there was a person that had to deal with this dilemma. Arizona State University junior Ahmad Sadd Nasim performed this gruesome act, and now the Maricopa Attorney's Office, and the ASU disciplinary department, must decide whether or not to press charges on this act of pusillanimity. It is believed by many that Nasim should face charges in order to allow true victims of hate crimes to come forward without shame, prevent a rise in hate crimes, and also prevent further acts of this nature. In order to allow the victims of true hate crimes to identify themselves without fear of not being heard, or believed, Ahmad Saad Nasim should be prosecuted. If he is not prosecuted, the victims of future hate crimes may not choose to come forward. Furthermore, these victims would find it nothing more than a waste of their time if they tried to report the perpetrators. Senior Vikesh Desai said," the lie hurts victims of genuine hate crimes." He continues, "It's like the boy who cried wolf. Now if another person is attacked in a hate crime, more people are going to question it. People are going to be afraid to speak up because they'll think that people won't believe them." (Chiu 1). However, if Nasim is prosecuted, and convicted, this type of situation would not be a problem. Consequently, the number of hate crimes committed will decline. The chance of an increase in the number of hate crimes committed relies partially on whether or not the Maricopa County Attorney's Office decides to press charges on Nasim. The number of performed hate crimes could rise if Nasim is not prosecuted for his wrong-doings. People that are prejudiced against Middle-Eastern immigrants, especially in light of previous events (WTC & Pentagon attacks), might find this as "open season" on committing hate crimes. Figuring that if the victims went to authorities they would not be believed anyway, they would be fearless. "... people weren't taking hate crimes seriously..." said Desai (Chiu 2). Therefore, the chances of them being caught are slim to none.

Peer College Counselor

There are many traits that define people, and most people share the majority of those traits. However, there are few traits that are unique, special, and rare. The ability to step up when it is required and be a valuable leader is one of them, and I am fortunate enough to have this trait. If a situation ever becomes tough or confusing and people need someone to guide them, I am always happy to accept that osition.I can think quickly on my feet and am able to remain calm and clear- minded in stressful situations. I believe that this trait puts me ahead of my fellow applicants because I understand the stress of being a high school student and I understand how to cope with such stress. Another significant trait of mine is that I am extremely personable and exceptionally easy to talk to. Whenever any of my friends have problems, whether it e in school, home life, or socially, I pride myself on the fact that I am fully capable of being there for them in their time of need.For instance, my sister had recently broken up with her boyfriend of over three years, and she was hysteric. She wouldn't smile, laugh, or even leave the house for at least a week. Everyday, I would clear my schedule Just to be with her, sit with her, and talk with her. I let her express every emotion and concern she was feeling, and, most importantly, I gave her the pportunity to speak freely.After that period, she couldn't stop thanking me for being there for her and being so easy to talk to. I believe this trait will be crucial in being a peer college counselor because, no matter what my peers will need, I know that I will be there for them. From what I have mentioned, I hope to have given you an accurate and positive image of the type of person I am. I'm a hardworking, determined individual and I hope you consider that during this application process.