FIN415 Risk Management Plan

FIN415 Risk Management Plan - Risk Management Plan 1 Risk...

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Risk Management Plan 1 Risk Management Plan Corporate Risk Management FIN415
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Risk Management Plan 2 Charles Merrill opened Charles E. Merrill at 7 Wall Street in New York City on January 6, 1914. Edmund C. Lynch, a friend of Merrill’s joined him a few months later and in 1915 the name became Merrill, Lynch and Co. After a series of mergers, the firm operated as Merrill Lynch, Pierce, Fenner and Smith in 1952 to become the clear leader in the retail securities brokerage in the world with offices in more than 98 cities and membership on 28 exchanges. The firm went public in 1971 with over $1.8 trillion in assets and operations in more than 40 countries around the world. Because of its strong presence in the government securities market, Merrill Lynch developed innovative cash management products for individual investors Merrill Lynch had its share of risk problems including a $400 million settlement paid to Orange County, California as a result of inappropriately marketed risky investments in 1994. The technology boom in 2000 led to $100 million fine for publishing misleading research in 2002 by the New York attorney general. Henry Blodgett, a securities analyst at Merrill was charged with securities fraud by the Securities and Exchange Commission (SEC) in 2003. Other lawsuits over employee discrimination, market timing, and diversity are additional examples of poor risk management (Ackman, 2002). Merrill’s biggest and final risk failure came as a result of the sub-prime mortgage bond market with leveraged investments causing a write-down of $8.4 billion. These losses led to the sale of Merrill Lynch to Bank of America in 2008. Even with the eventual sale, Merrill made headlines with the year-end bonuses it paid to its executives as the company received funds from federal bank bailouts. Risk Identification
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Risk Management Plan 3 Merrill Lynch includes a discussion of risks in its annual form 10-K filed with the SEC each year that contains a detailed explanation of its business. Several risks, identified in this report are listed below. 1. Trading Risk Management - Trading at Merrill Lynch is subject to market and credit risks. These risks are managed in accordance with established risk management policies and procedures. The Global Markets Risks committee at Bank of America prioritizes trading that needs a proactive risk mitigation strategy. The committee takes a forward-looking view of these risks to determine exposure and corrective action. 2. Standby Letters of Credit - Merrill Lynch currently guarantees $700 million in letters of credit for clients. Clients could default on their debt leaving Merrill Lynch liable. 3.
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This note was uploaded on 08/22/2011 for the course BUS 415 taught by Professor Barnes during the Spring '11 term at Coastal Carolina University.

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FIN415 Risk Management Plan - Risk Management Plan 1 Risk...

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