Risk Analysis Report: Brookfield Asset Management INC (FNCE 3151)

This assignment analyzes the various sources of risk associated with Brookfield Asset Management Inc., a Canadian-based asset management company. The report examines risks identified in the company's 2018 annual report, including interest rate risk, inflation risk, market risk, financial risk, business risk, liquidity risk, and exchange rate risk. It also explores the impact of these risks on investors and the company's financial stability. Furthermore, the assignment references a news story from November 2019 discussing the Canadian stock exchange's performance amidst global market volatility and the potential investment opportunities. The report highlights the importance of understanding market dynamics and geopolitical risks for financial investors.

RISK ANALYSIS

PART 1
In this assignment, various types of sources of risk of Brookfield asset management INC have
been elaborated in detail. Brookfield asset management INC is a Canadian based company and
its headquarters is in Toronto, Canada, and Brookfield place. The main service of the company is
management of assets and the company was established in the year 1899 (Bam.brookfiled.com).
The annual report of 2018 of Brookfield INC has been evaluated to identify the sources of
various risk associated with the company.
The company deals with raising capital both public and private from the institutional investors.
After analyzing the financial statement of 2018, it was identified that different risk has been
associated with Brookfield INC. Risk related to the interest rate, inflation rate, market rate,
financial risk, business risk, liquidity risk, and rate of exchange risk.
The investors are expecting a return of 12-15 percent on their investment but if there are any
changes in the returns of the stock then the investors would not receive their minimum return.
The price of the securities will also be affected by the changes in interest.
The other type of risk that has been identified is liquidity risk. If the company would not be able
to manage its asset efficiently then it will affect the liquidity of the entity. The liquidity of the
entity is maintained at different form such as in financial assets, cash, and credit lines. If liquidity
of Brookfield INC is affected then the company would not be able to pay its investors, secured
creditors, and shareholders.
Another type of risk that has been examined is fluctuation in the exchange rate. There are many
investors who are from other countries and are don’t want to take much risk in their investment.
If the exchange rate arises then the company would be liable to pay higher amount to their
financial investors. This increase in the exchange rate will be unfavorable for the borrowers of
the company as will be liable to settle their debt with a higher amount.
Market risk is another risk which can deteriorate the market position of the company. If the price
of the equity shares of the entity or other financial instrument decreases, then it will adversely
affect the market price of the stock or securities which will automatically lead to changes in the
amount of revenue.
The company is also facing the risk of giving credit to their borrowers. If the borrower fails to
fulfill their financial obligations then this type of risk arises. This failure will lead to decrease in
the total revenue of the entity. Th debt will be written in the profit and loss statement of
Brookfield INC.
PART 2
In the month of November 2019, there has been volatilities in the global securities markets but
the Canadian stock exchange experienced a bullish market. Many financial advisors advised the
investors to invest in the Canadian securities exchange. Canada equities are trading at a very
cheap rate as compared to the equities of the United States (Bloomberg.com, 2019).

In the first week of November 2019 the composite index of S&P/TSX decreases by 0.2 percent.
As the composite index decreases the exposure related to mutual funds could increase in the
domestic market. However, the geopolitical risk remains one of the biggest risks of the financial
investors. The two-year return of the Canadian bond also rises to 1.65 percent. The main reason
in the reduction of equity price of the US market is due to the lower prices of oil.

References
Bam.brrokfield.com. (2019). [online] Available at:
https://bam.brookfiled.com/-/media/Files/B/Brookfiled-BAM-IR-V2/quarterly-reports/2018/
annual/BAM-Annual-2018.pdf [Accessed 20 Nov. 2019].
“Bloomberg – Are You A Robot?”. Bloomberg.Com, 2019,
https://www.blooomberg.com/news/articles/2019-10-11/top-spot-and-other-reasons-to-be-
thankful-for-canadian-stocks.