Project Management PMP » Financial http://www.ausbanner.com Project Management PMP Professional Wed, 21 Dec 2011 22:34:55 +0000 en hourly 1 http://wordpress.org/?v=3.3 Personal finances and Administraci http://www.ausbanner.com/personal-finances-and-administraciaf-financial-n-20-gestiaf-n-of-risks/ http://www.ausbanner.com/personal-finances-and-administraciaf-financial-n-20-gestiaf-n-of-risks/#comments Wed, 19 May 2010 06:59:41 +0000 Project Manager http://www.ausbanner.com/personal-finances-and-administraciaf-financial-n-20-gestiaf-n-of-risks/ Related Posts
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]]> As we mentioned in previous articles we know that our government only represents about 30% of our retirement income. The company retirement pension plan offers another 30 % and many of us do not have one. It is up to individuals to invest wisely short and long term in order to make up for the short fall if he or she would like to live comfortably after retirement without giving up some retirement plans. In order to protect yourself against inflation, interest rate, business and market risks in your investment portfolio, it is wise to understand current economic conditions, knowledge of investments, and diversification. In this article, we will discuss risk management. 1. Life cycle riskIn fact, the amount of risk that will be acceptable will vary with the stage of the life cycle. Examples:a) A young person with no dependents will have a higher risk level than a middle-age person with a family. b) A retired couple requiring income to finance their life style every month tend to be more conservative than middle age people with a family. 2. Employment riskGovernment employees have more income security than someone self-employed, someone working in a service industry that often lays off workers, or seasonal workers. It is wise to balance your risk if you doubt your job security, you may consider putting some savings in very low-risk debt securities in case of lay off. 3. Diversify your investmentsDiversification is a basic principle in portfolio management that helps to reduce total risk by choosing securities of different types of investment vehicles (do not put all your eggs in one basket) so you spread your investment money over a variety of investments and adjust your investment according to your needs, life cycle, and economic conditions change. I hope this information will help. If you need more information, you can read the complete series of the above subject at my home page:http://lifeanddisabitityinsuranceunderwriter. blogspot. com/http://financialinvesting09. blogspot. com/

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Straight r

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]]> http://www.ausbanner.com/personal-finances-and-administraciaf-financial-n-20-gestiaf-n-of-risks/feed/ 0 The Importance of Using Financial Risk Management Software to Protect Against Financial Loss http://www.ausbanner.com/the-importance-of-using-financial-risk-management-software-to-protect-against-financial-loss/ http://www.ausbanner.com/the-importance-of-using-financial-risk-management-software-to-protect-against-financial-loss/#comments Thu, 04 Mar 2010 09:03:05 +0000 Project Manager http://www.ausbanner.com/the-importance-of-using-financial-risk-management-software-to-protect-against-financial-loss/ Related Posts
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]]> With the economy performing the worst it has since the great depression, and the US Government having to spend trillions of tax payer dollars to bail out investment banks and insurance companies, it is clear that far more effective risk management practices must be put into place. It is absolutely sickening that hard working US taxes payers are stuck flipping the bill to save greedy investment banks and insurance companies that invested foolishly with money they were entrusted to protect.
Public companies must adhere to strict financial risk management practices so they are not allowed to make high risk investment decisions that can lead to huge losses. We cannot repeat the financial meltdown we are experiencing now in 2008, especially since it was caused by greed.
What is even more disappointing about the financial crisis we are in is it could have been avoided. There are many outstanding financial risk management software applications available that can protect against making bad investment decisions that can lead to great losses.
So, the question is, what is financial risk and how is it measured?
Financial risk is the probability that an investment’s actual return will be different than expected. This includes the possibility of losing some or all of the financial value of a particular investment.
Now here is where investing gets tricky. It is known that the more risk you take, the more potential there is for a large gain. However, the more risk you take, the more potential there is for a huge loss. This is where greed can become very dangerous. One of the main reasons we are experiencing the financial disaster we are in right now is from investment banks and insurance companies investing in high risk consumer mortgages. They took the risk that they would earn a large return from offering high interest mortgages to people with poor credit. They also took a huge risk by allowing consumers to take out zero money down mortgages and interest-only mortgages.
Where the problem occurred is that a greater than expected percentage of consumers who received these mortgages could not pay them. And if people are not paying their mortgages, the investment loses value and causes financial losses. With advanced risk management software, investors would have been alerted that the potential for loss with these high risk mortgages was great and that the investor should be very aware that making these investments could lead to a huge loss.
The purpose of financial risk management software is to protect against making bad investment decisions that may lead to a large financial loss. It does this by estimating the how much risk is being taken for a particular investment choice and how much money could be lost if the investment loses value.
Here are a few advanced methods financial risk management software uses to calculate risk:
1. Measure value at risk (VaR). VAR is a technique that uses the statistical analysis of historical market trends and volatilities to estimate the likelihood that a given portfolio’s losses will exceed a certain amount. It can be thought of as the worst loss that might be expected from holding a particular investment over a specific period of time.
2. Monte Carlo. This is a problem solving technique used to approximate the probability of certain outcomes by running multiple trial runs, called stimulations, by using random variables.

Peter Geisheker is the CEO of The Geisheker Group marketing firm. Peter develops and implements strategic marketing programs for businesses including financial risk management software companies. For a no-obligation quote, contact The Geisheker Group marketing firm today. 920-471-1638.

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]]> http://www.ausbanner.com/the-importance-of-using-financial-risk-management-software-to-protect-against-financial-loss/feed/ 0 Risk Management For Banks and Financial Institutions http://www.ausbanner.com/risk-management-for-banks-and-financial-institutions/ http://www.ausbanner.com/risk-management-for-banks-and-financial-institutions/#comments Tue, 09 Feb 2010 03:45:42 +0000 Project Manager http://www.ausbanner.com/risk-management-for-banks-and-financial-institutions/ Related Posts
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Risk management is the analysis of risk coupled with the implementation of quality risk controls. Risk management is needed for banks and financial institutions, mainly because it insures a margin of safety that guarantees a levered financial firm’s solvency.

The unpredictability and inherent risks associated with the financial markets makes it vital for financial institutions and banks to implement risk management controls. The level of quality risk management policy and controls can make or break (literally) banks or financial institutions.

The term “risk management” has evolved over the past twenty years from the term “insurance management”. This evolved term covers a wider variety of responsibilities than insurance management ever did.

Financial risk management products, derivatives and other such contracts that help hedge and protect the downside, include interest rate swaps, foreign exchange swaps and contracts, as well as a plethora of derivative securities. There are dozens of types of risk management related derivative products, the most popular of them Credit Default Swaps.

The most important part of risk management is the transferring of risk. A bank or a financial institution can protect itself from the potential risks and pitfalls of its asset portfolio by purchasing some Credit Default Swaps.

Credit Default Swaps, the most popular kind of derivative, are derivative swaps that transfer exposure to fixed income assets (bonds, mortgages, loans) from the purchaser to the seller of said derivative.

Credit Default Swaps are more or less an insurance policy taken out by a creditor that pays out if the borrower defaults. The underwriter of the swap, in return for agreeing to assume the risk of the underlying asset, receives a stream of premium payments (premiums like the ones received by insurance companies).

Credit Default Swaps are the most popular form of Credit Derivative, derivative products that protect creditors against systemic risks in both the market and in the borrower.

Risk management related credit derivative products such as Credit Default Swaps, albeit good hedges for risk, are truly double edged swords, if coupled with wanton speculation and overleveraging.

In recent years risk management products such as credit derivatives have evolved into vehicles of speculation, instruments used by financial firms and institutions to make speculative and sometimes irresponsible bets on market movements.

Lack of regulation, coupled with poor understanding of complex and Byzantine instruments, led to the credit derivative market degenerate into, to put it bluntly, a Wall Street casino.

The downturn in the housing markets has led this derivative house of cards (no pun intended) to collapse upon itself, leading to insolvency and systemic failure. Credit default swaps, however are a zero sum game. Some financial institutions have profited from correct bearish housing market bets.

If risk management products were used responsibly by banks and financial institutions, instead of used to make levered bets, the whole financial calamity could have been minimized. It is quite ironic that systems put into place to reduce risks ending up being the root of exacerbated risk.

Once the damages of the financial crash are cleaned up and settled, proper risk management can again be put into place. The need for regulation, however, is an issue up for debate.

There are too many arguments for and against regulation of credit derivative markets for there to be a concrete solution to the credit derivative problem.

There is simply too much nuance in the moral, social and financial ramifications of credit derivative rules, regulation and policy; in no way is the credit default swap debate a black or white issue.

As long as banks and financial institutions use credit derivative products such as credit default swaps for hedging purposes only, the integrity of the risk management instruments will stay in place.

The whole concept of risk management for banks and financial institutions is nullified by improper and risky speculative activities. Risk management, if done in a proper and responsible way, can effectively mitigate systemic and market risks, risks that are both inherent in today’s global financial marketplace.

For risk management to truly be risk management there should be zero tolerance for rampant, irresponsible speculation. The last thing a bank or a financial institution needs to do is exacerbate its risks by mixing gambling (speculation) with risk management.

Nick Nikolis is living and working in Rhodos Greece and writing about Self help, Business, Hospitality Industry and destinations. Check here Rhodes Greece villas and Rhodes Greece apartments.

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