Task 1 – Written activities
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1 Pure risk – it is the chances of loss owing to peril or accident
2 Speculative risk – it is the chances of gain as well as chances of loss
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Among pure risk and speculative risk, pure risk can be mitigated through transferring of the risk to another party that is the insurance company. Speculative risk generalle involves the risk in stock market investment or gambling and therefore cannot be insured under the tradtional market of insurance.
3. Four steps in the risk management process
- Idtifying potential risk and assessing the impact
- Examining various courses of available action and developing the implementation plan
- Implementing the plan
- Evaluating and reviewing the plan
4.
- Recovery rate – in case of default, what percentage of exposures projected to b erecovered through proceedings of bankruptcy or through any other settlement form
- Credit exposure – in case of default the amount of outstanding obligation, if the default takes place
- Probability of default – likelihood that counterparty will default in payment of obligation over the time period of obligation or over the specific time period like year. If calculated on the horizon of 1 year time it will be called as expected frequency of default.
5.
- Character
- Capacity
- Capital
- Conditions
- Collateral
- Cause
- Common sense
6. Common types of security
Personal real estate, personal vehicles, business property, home equity, valuable items like collectibles or jewellery, equipment, assets and paper investment
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PARSER is the expert system used for credit analysis in Australia. Like 5 Cs PARSER system is used to analyse the following –
- Borrower’s personal character
- Requirement of amount and purpose
- Capacity of repayment
- Security
- Expedience or thye opportunities for future profits
- Return from loan
Task 2 – Project
1.
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Financial &
Economic
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Stakeholder/ s
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Manage Safety
& Health
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Stakeholder/s
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Internal
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External
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Internal
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External
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Credit risk
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Management, staff member, policy
makers
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Suppliers, vendors, local community
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Environmental hazard
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Staff member, Management, board members
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Vendors, local community
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Liquidity risk
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Management
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Customers, clients, regulatory bodies
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Risk of fire
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Management, Board members, staff members
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Local community, customers, cleints
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Regulatory/Legal
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Stakeholder/ s
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Professionalism and Reputation
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Stakeholder/s
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Internal
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External
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Internal
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External
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Administration of permits and licensing
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Board of directors, management,
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Clients, shareholders
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Unconscionable conduct
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Management, Board members, staff members
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Vendors, local community
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Control of the hazardous substance
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Board of directors, policy makers
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Shareholders, suppliers
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Unethical and illegal competitive practices
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Staff member, Management, board members
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Local community, customers, cleints
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Sales documentation
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Stakeholder/s
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Internal
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External
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Delayed settlement
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Management, Board members
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Customers, clients
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Poorly completed applications for loan
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Board members, policy makers
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Clients, customers
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Once completed; provide a brief commentary on your understanding of the Australian Standard AS/NZS ISO 31000:2009 Risk management — Principles and guidelines,i.e. definition and how it affects you as a Finance/Mortgage Industry representative.
The standard provides the generic guide for risk management. it can be applied towide range of operations or activities of any private, public or group or community enterprise.
The definition of risk is changed from “chance of happening something that will have impact on the objectives” to “the impact of uncertainty on the objectives”. As a representative in finance industry or mortgage industry, he shall take into consideration the difrent requirements of particular organization, particular objectives, structure, processes, context, operations, projects, functions, services, products, assets and particular employed practices. Further, this standard can be used for harmonizing the process of risk management. It further delivers common approach for supporting the dealing standardswith particular risks or sectors.
