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Risk Committee Structure of the Enterprise Risk Management Company

   

Added on  2019-12-03

22 Pages4203 Words130 Views
ENTERPRISE RISKMANAGEMENT

TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1Background of the organization...................................................................................................1QUESTIONS...................................................................................................................................1Aims & Objectives of the Standard Chartered PLC....................................................................1Problems that have been encountered in the past........................................................................1Problems faced by the other companies:.....................................................................................3Rules and regulations...................................................................................................................3The potential opportunities that could enhance company performance......................................4Threshold of acceptable Risk.......................................................................................................6Risk Committee Structure............................................................................................................7RISK REGISTER............................................................................................................................7CONCLUSION..............................................................................................................................16REFERENCES..............................................................................................................................18

INTRODUCTION Enterprise Risk Management is the process of managing different types of risks whichcan have an impact on the organizational strategies which are implemented to achieve corporateobjectives. All the business activities involves a certain level of risks and these are managedthrough anticipating, understanding and deciding what can be done. The purpose of this report isto examine the risk management within an organization named Standard Chartered PLC. It willrecognise the issues which could threaten or enhance the achievement of the aim of the company.The study will also find out the mitigation actions which can be adopted by the company inresponse to these issues. At last the report will end in preparing a risk mitigation register for TheStandard Chartered Group. Background of the organization The Standard Chartered Group is a leading international banking and financial servicesgroup, specifically focused on the markets of Asia, Africa and the Middle East. The bank isregulated by the Financial Conduct Authority and Prudential Regulation Authority in the UK(Standard chartered plc, 2014). The ultimate parent company of the bank is Standard CharteredPLC which is listed on the London Stock Exchange and also on various other stock exchanges ofother nations. QUESTIONS Aims & Objectives of the Standard Chartered PLCFollowing are the objectives of the study:To achieve accurate level of security at the global levelTo prepare remediation and responsive plans in order to meet the strict financialcompliance requirementsTo maintain a robust and disciplined approach towards the risk management Problems that have been encountered in the past Standard Chartered has faced different kinds of risks in the past. These are as follows:Providing credit to clients – Bank always carries a risk from the client side related to default ofloan and payments. In the first resort it is a loss to the lender as it creates disruption in the cashflows and increases the collection costs for the company (Dikmen and Birgonul, 2004). This type1

of risk also puts an impact on the business of the company as it becomes difficult to increase therevenue and profits.Country cross border – Under this risk, the bank does not able to obtain payments from itsglobal customers or third parties due to contractual obligations. These types of risks haveemerged in past few years because company’s exposure to China, Hong Kong, India, Singapore,Korea and Indonesia has also increased significantly (Emblemsvag and Kjolstad, 2006). Market – This risk is regarded as the potential for loss of economic value or earnings due tohostile changes in the financial market rates or prices. Company’s exposure to market riskgenerates principally from customer driven transactions. The primary categories of market risksfaced by the company are:Interest rate risk Currency exchange rate risk Equity price risk Commodity price risk (Rasid and et.al., 2011)Liquidity – It is another major risk which has been faced by the company many times. It createsan unusual situation as company either do not have the sufficient financial resources to meet itsobligations or can only access these financial resources at high costs (Frenkel, Dufey andHommel. 2005)Operational – It is the possibility for loss resulting from failure of manpower, process andtechnology. It can arise from day to day operations carried out by the group. These issues cantake in several forms and are very important to deal with (Hall and Duperouzel, 2011)Pension - It is another very unusual issue faced by the company. It is a potential loss arisingdue to incapability in meeting the assessed shortfall in the Group’s pension schemes. Pensionrisk is not related with the financial performance of this scheme but it is focused on the threat tocompany’s position arising from the need to fulfil the obligations of pension scheme. Reputational – This kind of threat is related with damage to the goodwill, loss of earnings andcontrary impact on the market capitalization of the company (Hartford, 2004). The stakeholdersalso starts perceiving negative of the group and its actions. 2

Problems faced by the other companies:There are many other companies in the banking sector which are facing many other typesof risks. These can be explained as follows:Compliance risk – It is the risk related to breaching legal enactments, statutoryregulations, official provisions and internal regulations (Hoag, 2011). It involves theissues related to official sanctions, financial loss and loss of reputation. Foreign exchange – It is a potential loss which is arising due to change in the value of thebank’s assets or liabilities. It arises due to fluctuations within the exchange rate. Thebanks performs transactions related to foreign exchange for their customers and for thebank’s own accounts (Hoekman, 2004). The value of foreign currency can diminish dueto adverse movement and it causes huge losses for the firms. Business Risks – This type of threat emerges from the bank’s long term business strategy.Under this phase, firms are not been able to provide response to the changing marketconditions, loss of market share, etc (Khatta,2008). It mainly happens due to selection ofa wrong business strategy. This might lead to the failure of the business. Commodity risk – This kind of threat mainly arises due to adverse impact on thecommodity prices. The commodities include agriculture products (wheat, corn, live-stock), industrial commodities (iron, copper and zinc) and energy commodities (crude oil,gas). Change in the value is seen due to change in the demand and supply of services(Klemetti, 2006). Any of the bank holding these products as part of investment issubjected to this kind of risks. Rules and regulations Standard Chartered Bank is authorized by the Prudential Regulation Authority and it isregulated by the Financial Conduct Authority and Prudential Regulation Authority. The termsand conditions of the bank are governed by the English Law and any kind of disputes related toorganization shall be covered under the non-exclusive jurisdiction of the English Courts. All thetransactions of the group banks in UK are protected by the country’s regulatory regime for theconduct of the business (Knight, 2012). 3

The potential opportunities that could enhance company performanceThere are many opportunities which are knocking on the door of Standard Chartered Plc:Mobile banking – The trend of mobile banking is increasing very significantly and it can beseen that people these days prefer to do all their transactions in a relaxed manner. Throughmobile banking, they can manage their cash very easily sitting in any part of the world (Lee,Yeung, and Hong, 2012). This gives them the comfort and easiness. The trend of mobile bankingis increasing because number of smartphones are also increasing. In this way bank can connectwith its customers in very effective manner. Standard Chartered can also develop its mobile appwhich can make the banking very easier for them as well their customers (Manelele and Muya,2008.). Different type of apps can be introduced with more advanced and user-friendly features.Hence in this manner company’s performance can be enhanced.Imparting banking knowledge to customers – Many of the customers wants assistance infinancial planning and framing of financial goals. The banks which can impart correct advice andknowledge to the customers are expected to grow their businesses (Minelli, Rebora, and Turri,2008). Many people are of the belief that they are ready to increase business with their serviceprovider of advisory services are offered to them. Companies in the banking sector has theopportunity to develop a mutual exchange of value through personalising their experience. Forthat purpose it is essential to understand the client’s needs and expectations. This can be done byleveraging both internal and external resources (Pellegrino, Vajdic and Carbonara, 2013). Continuous innovation – It is evident that banking sector has seen great transformation in therecent years. The functioning patter of the companies has changed completely as compared to thetraditional methods (Randall, 2008). It has become essential for the banks to respond effectivelyto the changing market conditions. Continuous innovation is the key to success. Withoutinnovation, it is difficult to cope up with the increasing complexities of the business world. Pathof innovation can be very effective and resourceful for the companies and their business. In thisway the performance can be enhanced (Samson, Reneke, and Wiecek, 2009). Improved economic conditions – It is another very big opportunity for the organization.Improved conditions can increase the demand for products and services of the bank. It alsoincreases the spending power of the individuals as more and more money starts coming into theeconomy (Valsamakis, Vivian, and DuToit, 2004). There is an availability of capital andliquidity funding for the business. Through this company can move on to the path of expansion4

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