Topic 1 Introduction-Nov2017.pptx - BAFI 1029 Risk...

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BAFI 1029 - Risk Management Topic 1: Introduction
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Important Note These lecture notes are prepared for an overall understanding of Risk Management. You are expected to thoroughly read learning materials after your Lecture. This chapter is NOT examinable in final exam. 2
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Treasury Management The treasury provides facilities for: Investment of company funds in financial markets; Generating funds in capital and money markets to support investments and operational activities; Manage foreign currency reserves and participate in foreign exchange markets; RMIT University©2015 3 School of Finance, Economics and Marketing
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Treasury Management Conduct hedging positions to manage risk exposures; Provision of hedging services to other areas of the business; Strategic advice on treasury policy at senior board management level; Treasury taxation and accounting; Processing payments and settlement operations; External and internal reporting, risk controls and compliance. RMIT University©2015 4 School of Finance, Economics and Marketing
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Key areas of supervisory Risk management systems certification; Business continuity management; Audit (external auditors, on-site visits); Disclosure and transparency; Large exposures; Foreign currency exposures; Subsidiaries, ownership and control. 3/8/18RMIT University©2015 5
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Risk Management Risk is a natural consequence of conducting business. An organisation will undertake risk management strategies to the extent that it increases the value of the firm in a sustainable way over the longer term. A key component in risk management is the ability to set up hedging strategies that allows a firm to share risk either with external parties or across company divisions that are situated in disparate and international locations. There are two key exposures that underlie risk management, namely operational risk and financial risk . 3/8/18RMIT University©2015 6
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Financial Risks Price Risk: the risk of losing money or the value of an asset, investment or commodity due to a change in price movements and can be referred to as market risk. Liquidity Risk: for an organisation, the availability of funds to cover the day-to-day business operations. For a central bank or nation state, the overall funds in the financial system.
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