University Finance and Economics Report: Risk Management

This report analyzes risk management within the finance and economics domain, focusing on two key areas: household risk and the risk faced by financial institutions, specifically Bank of America. The report identifies and discusses the various risks affecting households, such as unemployment and financial asset risks, and explores the impact of economic downturns. It suggests strategies for individuals to mitigate these risks, including diversifying investments and adjusting financial planning. The report also examines the types of risks that Bank of America faces, including credit risk, interest rate risk, and regulatory risk. It highlights the potential impact of economic slumps on the bank's operations and proposes financial decisions and risk management methods, such as diversifying resources and implementing stringent loan approval processes, to minimize these risks. The report provides references to support its findings.

Running head: Finance and Economics
Finance and Economics
Name of the Student
Name of the University
Author Note

1
Finance and Economics
Table of Contents
RISK MANAGEMENT IN HOUSEHOLD SECTOR..............................................................2
RISK MANAGEMENT IN BANK OF AMERICA..................................................................2
References..................................................................................................................................3

2
Finance and Economics
RISK MANAGEMENT IN HOUSEHOLD SECTOR
Household face many risk related to change in the economy. The risk which is faced by the
household is sickness and disability, unemployment risk and financial- asset risk. The most
critical risk for the household is the unemployment risk (Rampini & Viswanathan 2016). As
if person is unable to get employment than it will not able to survive in the society.
The risk in related with the household in the United States economy is that the it is forecasted
that the economy will slow down in current year as a result of economic slum may arise in
the economy and people will have to lose their jobs in regards with it and as a result the
poverty line will also increase (FocusEconomics 2019).
The financial and economic decision regarding the risk is that the individual will not invest in
the debt plan as it will decrease in the current economy position, the individual will do saving
accordingly and will also control the expenditure amount in the long run.
The risk management method to be used by the individual is that it should diversify its
investment from the housing market as it is going to be low market so the individual should
change their investment decision.
RISK MANAGEMENT IN BANK OF AMERICA
Risk related to the company are credit risk, interest rate risk and regulatory risk. Credit risk is
the risk that the loan amount given by the company may not be return by the individual.
Interest rate risk is the change of interest rate due to change in the rules of government
bodies. Regulatory risk is the risk which happen due to change in the law and other regulation
related to the company. The most important risk regarding the bank is the credit risk as it
involve the most money of the bank and so if the money does not able to get by the bank than
it will be a big risk for the company.

3
Finance and Economics
The risk which affect the bank is the economic slum which will take place as if there is slum
in the economy than the individual will not able to take much savings in the bank and as a
result the bank will not able to rotate the money so it will affect the business of the company.
The financial decision taken by the bank is that it will change it will diversify the resources in
regard with the other business so that it avoid the risk of getting its money block
The method which the bank uses to minimize the credit risk is that it should give loans after
checking the proper details of the company and also it should hive loans upon some
intangible mortgage so that if the individual does not pay then the bank can recover it by
selling the mortgage property.
References
FocusEconomics | Economic Forecasts from the World's Leading Economists. (2019). United
States Economy - GDP, Inflation, CPI and Interest Rate. Retrieved from
https://www.focus-economics.com/countries/united-states
Rampini, A. A., & Viswanathan, S. (2016). Household risk management (No. w22293).
National Bureau of Economic Research.

4
Finance and Economics