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Section 1: Overview
For this assessment task you will be allocated a topic and will work in groups of 2. This assessment has an oral and written component.
As per the schedule of topics, on campus-students are required to give an 8 minute presentation in-class in a specified week. Marks will be allocated for individual performance and the effectiveness of the group. FLEX [Distance] students will be required to create a video presentation.
Topics will be made available in Week 1. Requests for alternative questions / alternative presentation date is at the discretion of the lecturer AND WILL ONLY BE CONSIDERED in exceptional circumstances and must be made in writing (email) by the end Week 1.
Section 2: Submission Details and Issues that will Impact on Your Mark.
On-Campus Students ONLY: This is a group assessment [Groups of 2 persons only]
Oral Component: Provide an 8 minute presentation. Note: timing will be strictly monitored ie your presentation must not exceed 8 minutes. To enable each student to showcase their skills the suggested format is as follows:
Written Component – Organisation is a major criteria of this assessment and covers your timely submission of all required presentation items. By 5pm the day before your scheduled presentation date you must submit:
Note 1: Only one submission can be made. Re-loads or re-submissions will not be accepted.
Note 2: Only one student in each group upload items.
Note 3: Students should also have their slides on USB stick at the lecture as a backup.
FLEX / Distance Students ONLY
Oral Component: Provide an 8 minute presentation via YouTube or Alternative Options [See Special Submission Instructions below]. Note - timing will be strictly monitored ie presentation cannot exceed 8 minutes. The suggested format is as follows:
Useful Advice: Students have found it practical to record their presentation in parts i.e. create 4 x 2 minute You-tube clips such as Part 1, Pat 2, Part 3 and Part 4.
Written Component – all items uploaded to Moodle by 5pm on the day prior to the presentation
}The exchange rate fluctuations is termed as foreign exchange risk or foreign exchange exposure (Salleh, 2013).
}Volatility in the currencies can lead to adverse impact
Impact of Foreign Exchange on Companies
}Companies generate funds by borrowing debt or issuing equity (Mullings, 2018).
}The investment are majorly in the form of overseas assets and foreign currencies
}Domestic companies face risk
Depreciation of domestic currency implies that the payment of debt will cost more (Mullings, 2018)
Depreciation of Home currency
}Depreciation in the home currency means a fall in the value of the domestic currency
}Low worth as compared to USD $
}Exports cheaper
}Imports expensive
}Inflation
Impact on Interest payment
}Interest to be paid in foreign currency
}Weaker domestic currency implies more of domestic currency needed for the repayment
}Business and payment impact negatively (Spiceland et. al, 2011)
}Cost more domestic currency to repay USD $.
Economic Risk
}The depreciation of the home currency leads to economic risk
}Uncommitted cash flow pattern (Simon & Hillson, 2018)
}Additional burden on the home currency
}More level of debt
}Valuation of the currency is disturbed
Economic Risk
}The depreciation of the home currency leads to economic risk
}Uncommitted cash flow pattern (Simon & Hillson, 2018)
}Additional burden on the home currency
}More level of debt
}Valuation of the currency is disturbed
Lowering of Exchange rate
}Investor will demand more of other currency
}The valuation of other currency in question will increase
}Depreciation of the currency sends a negative signal
}Recession situation
Conclusion
}It comes to the forefront that the currency is always exposed and vulnerable to risks. Therefore, the firms, as well as the economy needs to have strong risk management approach to ward off the impending danger. This can be done through :
}Financial contract such as forwards, options, etc
}Operational mechanism like the geographic diversification (Simon & Hillson, 2018).
Bank Run – Definition and Features
Famous Bank Runs
Bank run generally occurs when customers start withdrawing their money because they fear bank is trouble. This is a herd instinct and all of a sudden all customers panic and this fear spreads like wild fire. This panic ensues resulting in stampede and even riots. The bank feels the crash crunch and run out of cash resulting in sudden bankruptcy. Although the financial institution can take some temporary measures to protect itself and it borrows cash from the Government or central banks but this panic kills the financial business. This psychological herd instinct influences the general decision and judgement of people. A bank run crashes the whole economy as it creates the dominoes effect – one bank knocking the other and ultimately the panic damages the entire economy of the nation (Market Business News, 2018).
Panic of 1907
The 1929 Wall Street Crash
The Argentinian Debacle
Causes of Bank Runs
There are three main reasons of bank run are as follows (Lee, 2002):
Techniques to Prevent Bank Run
Banks run on depositor’s money and if depositors withdraw money all at a time even a sound financial institution can sin.
Bank run can be prevented in three ways discussed below (NPR, 2012):
Biggest Bank Run in U.S. History
The recent and the biggest bank run took place On Thursday September 2, 2008 in USA. Around $4.5 billion were pulled out of the system every minute by the depositors. As a result of this U.S. economy imploded in just 5 hours (Livingstone, 2017).
Human Psychology of Bank Run
Masses of people withdrawing monies are considered as bank run and generally this behavior is termed as ‘mass panic’. But, Psychologists believe that this behavior is natural and not panicky. This is because people’s behavior is orderly and quite calm which is not the case in panicky situation. People cooperate and control their emotions. Furthermore, this course of action that people adopt is the most natural action. In such cases, communication or giving reassurances simply backfires because people lose confidence and trust in the banks and financial institutions (Drury, 2015).
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