Commonwealth Bank: Risk Exposure Management Strategy Report

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This report provides a comprehensive analysis of risk exposure management strategies within the context of financial investment services, specifically focusing on the Commonwealth Bank in Australia. It begins by presenting the risk management strategy, identifying target and non-target business types, and delving into the development of a robust risk management framework. This includes an examination of relevant legislation such as the Insurance Act, 1973, and the Corporation Act, 2001, as well as organizational policies and financial principles related to risk. The report identifies various risks, including data breaches, and proposes mitigation strategies, emphasizing compliance factors and risk assessment criteria. Furthermore, it collates up-to-date information, evaluates risk acceptability factors, and outlines risk acceptance and rejection criteria. The report also covers high and low hazard risks, financial principles, and risk mitigation strategies. It concludes with a discussion of necessary documentation, feedback mechanisms, and essential elements for effective risk management. The report underscores the importance of proactive measures to safeguard financial institutions from potential risks, ultimately protecting their market share and public relations.
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Determine and manage risk
Exposure strategy
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Table of Contents
INTRODUCTION...........................................................................................................................1
1. Presenting the risk management strategy................................................................................1
2. Presenting what type of business is target and not target........................................................1
3. developing risk management...................................................................................................2
a. All relevant legislation............................................................................................................2
b. Organizational policy..............................................................................................................2
c. Relevant risk............................................................................................................................2
d. Financial principles and process related to risk......................................................................2
e. Relevant business hazard.........................................................................................................2
f. Relevant risk exposure.............................................................................................................3
g. Determining compliance factor...............................................................................................3
h. Risk mitigation strategy..........................................................................................................3
i. Risk assessment criteria...........................................................................................................3
4. identify and collate all up to date information........................................................................3
5. Factors and evaluate risk acceptability factors........................................................................4
6. a Risk acceptance and rejection criteria..................................................................................4
b. high and low hazard................................................................................................................4
c. risk mitigation strategy............................................................................................................4
7. documents...............................................................................................................................5
8. Feedback.................................................................................................................................6
9. Necessary things......................................................................................................................6
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................8
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INTRODUCTION
Risk management strategy is helpful to protect a business from any risk. For this report
the chosen company is Common wealth bank in Australia who provide insurance to the people.
Report provides risk factor for financial investment service and identify appropriate risk
exposure management strategy and different types of laws, organizational policy or information
needed which are applicable for developing risk management strategy.
1. Presenting the risk management strategy
a)
there are many factors that affect the insurance service which is provided by a company
such as data Breaches in which many business are faces problem in cybersecurity and the same is
also faced be Common wealth bank in Australia (Sachlis and Haslem, 2015).
b)
In order to mitigate the risk of data breach, company has to take a review that the
company is compliance with a Payment Card Industry data Security Standards and if found
failure then it can result in a form of penalty.
c)
There is a need to communicate such type of strategy with customers as well as
intermediaries because by understanding this strategy will be helpful for them to overcome from
risk (Lister, 2017). For communicating this, owner of the company will hold up a meeting and
state their employees regarding the strategy which needs to be implemented and as a result, it
will be helpful to mitigate the problem.
d)
In order to manage this strategy at personal level, manager of a company will implement
this into workplace (Zhang and et.al., 2016). Every member as well as customers are bound to
use such digital technology and complying with this security standards against a digital data
security and breaches their entire payment network system.
2. Presenting what type of business is target and not target
The banks which provided the insurance services to their customers are targeted because
this business mostly faces high risk related to offering insurance services. On the other side,
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retail industry is not targeted because such type of business do not require any unique strategy to
be implemented in order to mitigate the risk factors.
3. developing risk management
a. All relevant legislation
Insurance Act, 1973: It helps to set minimum assets as well as economic condition
requirements that are needed to enter in an insurance market.
Insurance Contract Act, 1984: It mainly deals that there is a fair balance between
interest of an insurer and with insured.
Corporation Act, 2001: this shows a way in which an agents and insurer carry a
business and how they are dealing with customers for the success of a business.
The Australian Banking Association Code of Practice: This law helps a monitoring
that a banking met out all best banking practice standards or not (Bromiley and et.al., 2015).
b. Organizational policy
To determine the performance, there is a need to take a review that it will follow all
organizational policy such as it compliance with legislation as well as regulation, have risk
mitigation strategy, also compliance with the organizational procedure and strategy application
for risk management (Clement, Othman and Sirat, 2018).
c. Relevant risk
High hazard risk: If the company is actually faces high hazard risk then the result will b
come in a form of Breaches in compliance, faces financial loss, degrade market share, affect
public relations.
Low Hazard risk: to mitigate the low risk hazard, bank has to develop strategy related to
minimal risk exposure and also cope up with sudden market fluctuation condition.
d. Financial principles and process related to risk
The financial principle of risk is to solve all type of risk in business and its exposure
process is to review whether the risk is mitigate or not through maximizing the sales of a
company's product or services (Grant, 2016).
e. Relevant business hazard
Financial business hazard is taken which is fluctuating because of market situation.
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f. Relevant risk exposure
Financial loss is the biggest risk which a business may suffer and to control this, the
company has to develop those risk mitigation strategy which is helpful to maximizes the current
business.
g. Determining compliance factor
ï‚· If a company is not comply with all legal rules and legislation that is required by a
company.
ï‚· Breach in data security can be a factor.
ï‚· Imperfection in legal system of the country.
ï‚· Breach in contract by clients.
h. Risk mitigation strategy
The best risk management strategy includes to reduce the risk and follow the act such as
Data Protect Act, that help to prevent all data from going to misused (Hanson and et.al., 2015).
i. Risk assessment criteria
In risk assessment criteria, the company needs to follow the laws that include human
health and safety law, environmental protection, legal and regulatory compliance, cost and their
functional performance.
4. identify and collate all up to date information
Information Review
Legislation Insurance Act, 1973 and Insurance contract act, 1984 is
reviewed.
Organisational policy There is a need to follow all policy and strategy should be
apply for risk management.
Risk As per Australian risk management standard high risk
hazard can be mitigated but they may cause result in a form
of financial loss.
Financial principle This is link to develop risk management strategy that help to
protect a business from financial loss.
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Risk mitigation strategy Reducing the chances of risk.
Factor Non- compliance of legal laws.
5. Factors and evaluate risk acceptability factors
In order to evaluate the risk acceptability factor that also create potential impact upon an
organization and it also varies from the product as well as the type of products which are offered
to their customers. In the case of Commonwealth Bank, they faces problem related to data
breaching and this can be mitigated by using cyber law into the working area.
6. a Risk acceptance and rejection criteria
The risk for a company can be accepted if the level of risk is high but on the other side,
the type of hazard is low then there is a chances to reject this risk. As the bank has high range of
employees and its magnitude is such that high in size and there is more chances to bear a high
risk (DeAngelo and Stulz, 2015). As the company have a risk of data breaching which can be
mitigated and this type of risk are likely to be changed as per there is fluctuation in market.
In order to take the responsibilities of their company's manager then it is depend upon
them whether the risk is belongs to high hazard then they needs to take legal advice and thus the
parameters are to be taken into consideration for the acceptance as well as rejection for the risk
assessment.
b. high and low hazard
The high hazard financial risk areas are those which affect the financial position of a
company and as a result the entire market system get affected and this type of areas are credit
risk, market risk and operational risk that affect entire business in negative way. For this purpose,
the mitigation strategies are quite necessary to be taken in appropriate way.
On the other side, low hazard financial and legislative risk areas in a banking sector are
those which can be mitigate by applying strategy at lower cost. This areas are such as moral
hazard, business risk and reputational risk.
c. risk mitigation strategy
Policies and procedures change: It is a another risk mitigation strategy that includes
policy and procedures changes that help to mitigate the risk in proper way. on the other side,
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changing in this will assist a company to overcome from any problem that may affect company's
financial position (Lee and et.al., 2018).
Change management strategies: sudden change in the management structure of the
company will also help to mitigate the risk management system. Such that previous
management may creates hurdles in the path of success so there is a need to change the structure
of a company because it will further help to solve many problems.
Implementation of contingency plans: By making plan related to mitigation of the risk
management will further helpful for the company to sustain their brand image in market and this
will further helpful for a company to attain all defined goals and objectives. Contingency plans
are directly linked to reduce the the risk management and by applying into work area will be
helpful to overcome a problem.
Altering actions to make up for damages causes by risks: by reducing and
transformation the risk will be helpful for a company to take alternate action to mitigate the risk.
Hence it is beneficial for a company to overcome from a risk.
7. documents
Purpose: the risk management plan is used to ensure that the risk are manage at
workplace only and risk assessment process is a set of identification, assessment, mitigation and
controlling of project risk (Schoenmaker, 2018).
Guidelines: Only the manager is responsible for overall risk assessment. The entire work
should be communicate in well manner and the risk should be mitigate in proper sub team only.
Stakeholders are also informed in their current risk status.
Purpose: Risk acceptance criteria is used in order to determine the exact mitigation
strategy is helpful for the business to overcome from the risk.
Management structure: The management structure needs to be reviewed and changes in
accordance to mitigate the structure of a company.
Policies: It is necessary for a company to compliance with all requirement and policies
related to company as well as government too.
Action plan: Contingency plan should be taken in order to mitigate the risk.
Procedures: The company need to follow all the procedure in order to accept the
changes.
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Information: Proper information should be provided given and communicate in well
manner so that all staff members get to know about this.
Resources: People such as staff members, capital and advance techniques are needed as a
resource (Acharya, 2018).
Reporting and recording structure: It should be proper and appropriate and well
structure as other can understand it.
learning and development opportunities: Through risk management structure,
employees will also learn different strategy which can be helpful for their future development.
Review and monitoring structure: This mitigation strategy needs to be monitored at
proper interval.
8. Feedback
Being a manager of Commonwealth Bank, taking a feedback from strategic manager and
from employees which will be helpful to determine that the risk management strategy is helpful
for the company or not. They will help to identify that risk management strategy is help to
mitigate the problem of a risk or not. The feedback received from their employees is such that
they are not satisfy with the offered products then manager has to take different strategy as an
alternative option.
9. Necessary things
a. Office equipment, new technologies are to be used with upgrade software system so that it will
be helpful to complete the assessment as early as possible.
b. All legislation such as Insurance act, privacy act should be followed by the company and all
the Australian codes of practices should be followed by the company in order to complete the
assessment risk management strategy (Hopkin, 2018).
c. Australian Standards for risk management is AS 4360:2004 that provide a generic guide in
order to manage the risk and further specify the elements of a risk management process that is
applicable for a sector. And further HB 436:2004 that states the guidelines which are designed in
order to support the standards.
d. The documentation which are needed by an organization is such that all the risk management
register, policy through which a business is compliance with.
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CONCLUSION
By summing up above report it has been conclude that to mitigate the risk, the company
has to prepare risk management strategies which is quite helpful to sustain its brand image. In
addition to this, the company has to follow all rules and regulation which is prescribed by the
company because this further help to mitigate the risk. Report also concluded that there are
various types of documents needed in order to implement the risk into a working area. Further
report also shows different factors that are also aid for risk and to mitigate this, report provide
different mitigation strategy too.
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REFERENCES
Books and Journals
Acharya, V. V., 2018. Understanding and Managing Interest Rate Risk at Banks.
Bromiley, P. and et.al., 2015. Enterprise risk management: Review, critique, and research
directions. Long range planning. 48(4). pp.265-276.
Clement, C. K., Othman, S. H. and Sirat, M. M., 2018. Development of Metamodel on
Information Security Risk Audit and Assessment for IT Assets in Commercial
Bank. International Journal of Innovative Computing. 8(2).
DeAngelo, H. and Stulz, R. M., 2015. Liquid-claim production, risk management, and bank
capital structure: Why high leverage is optimal for banks. Journal of Financial
Economics. 116(2). pp.219-236.
Grant, R. M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley &
Sons.
Hanson, S. G. and et.al., 2015. Banks as patient fixed-income investors. Journal of Financial
Economics. 117(3). pp.449-469.
Hopkin, P., 2018. Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Lee, J. H. and et.al., 2018. Profit sharing as a management strategy for a state-owned teak
plantation at high risk for illegal logging. Ecological Economics. 149. pp.140-148.
Lister, R. C., 2017. Bank Behavior, Regulation, and Economic Development: California, 1860-
1910. Routledge.
Sachlis, J. M. and Haslem, J. A., 2015. Commercial Bank Capital Debt, Business Risk, and
Stock Price.
Schoenmaker, D., 2018. Resolution of international banks: Can smaller countries
cope?. International Finance. 21(1). pp.39-54.
Zhang, D. and et.al., 2016. Non-performing loans, moral hazard and regulation of the Chinese
commercial banking system. Journal of Banking & finance. 63. pp.48-60.
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