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Reflection Three
Amanda Strong
University of Phoenix
FINCB/571
Daniel Pasternack
December 29, 2023
2
Reflection Three
Systematic and Unsystematic Risk
You are the chief risk officer for a company, and you have been tasked with identifying the
areas where your company is exposed to systematic and unsystematic risks. Based on the information you learned about this concept, what approach would you take in explaining how systematic and unsystematic risks affect risk planning?
Describe
your approach. Name 3 or more systematic or unsystematic risks your company might face. Think of the implications if your company decides not to be initiative-taking and plan for these risks.
As a chief risk officer for your organization, you can be tasked with identifying the areas that your company is exposed to systematic and unsystematic risks. To identify these risks, you need to know what systematic and unsystematic risks are. Systematic risks are the risks that result from contributing factors that are outside of the organization’s control. These risks can be considered routine and are brought on by external factors outside of your organization that impact the organization. Examples of systematic risks can be found in market risks, interest rate risks, purchasing power, and exchange rate. Unsystematic risk, also known as company-specific risk, is a term used to describe risks that are brought on by internal business factors. Organizations that have a variety of investment types will help to minimize risk and help to control the types of risks. Residual risk, specific risk, nonsystematic risk, and diversifiable risk are examples of unsystematic risk. System risk is the financial risk that is constantly evolving in a market impacting everyone involved in the market.
The market’s overall risk is determined by the direction of the market. The company can be
doing well overall and the price per share could drop if the market is experiencing a decline.
3
Market risks make up about two-thirds of the total number of systematic risks. The systematic risk market has a high-risk rate; since internal rate risks are a risk that is adjusted according to the market value interest rate, it will manifest as systematic risk. Two ways to examine the overall interest rate risk. Fluctuations in the security’s interest rate are linked to the cost of risk and the reinvestment rate, which is determined by dividing dividend income by the reinvestment interest rate. Reinvestment risk would increase or is now positive if the price risk has decreased, which is reflected as negative. The risk associated with inflation is the risk to the organization’s purchasing power. As inflation takes place the company’s capacity to buy massive quantities of goods declines because the cost of a single good has increased. When there is inflation in the economy an investor’s rate of return does not rise with inflation. The investors’ rate of return falls over the long term. The organization does not plan for these risks and can face financial risk
and could lose investors. To ensure the risk is minimized before encountering it is important to evaluate any potential outcome and adjust the organization’s strategy, as necessary. Although as most organizations know you are not able to eliminate all risks, reducing them can help to minimize the impact on the organization.
Venture Capital
You are a business consultant who works with new business owners. A new client wants to start a bakery and seeks your advice. Based on what you have learned from the readings, discuss the advantages and disadvantages of using venture capital as startup funding for a business.
Describe
what approach you would recommend for the client by using the information you
researched.
As a business consultant using venture capital as a startup funding for an organization has both benefits and drawbacks as far as risks and rewards. One of the benefits is access to business
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Related Questions
According to the risk management process in ISO 31000, which of the following is a necessary step in risk assessment? Select one: A. Risk treatment B. Risk transfer C. Risk analysis D. Risk minimisation
####
i want answer within one hour,Thanks
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QUESTION TWO (2)
a) You have recently been employed by Quantum Analytics as the chief risk officer.
Given the fierce competition within the financial sector, your institution's core
goal is to strategically: create, enhance, and preserve value. How do you help
your company achieve the above using risk management as a (i) Liability tool,
Santun
(ii) Opportunity Tool, (iii) Organization tool, (iv) Compliance tool, and (v)
Communication tool?
b) A trader enters to a long cotton
futures contract when the futures price is 50
cents per pound he contract is for the delivery of 50,000 pounds. How much
does the trader gao lose if the cotton price at the end of the contract is
i
48.20 cents per pound
51.30 cents per pound?
c) Explain carefully the difference between hedging, speculation, and arbitrage.
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Examine the main problems in risk management. Discussion What role does risk management play in formulating a company's strategy?
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1. Looking at the COSO framework for Enterprise Risk Management, you will notice that this is present all throughout the various functions and levels in an organization. This is to ensure that policies and procedures are followed in making risk responses and implementing company's directives.
A. Control Activities
B. Risk Assessment
C. Monitoring Activities
D. Risk Culture
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Question 1 2020
(i) Agency theory is based on the view thatA. The purpose of corporate governance (CG) should be to satisfy (as far as possible) the objectives of all stakeholders.B. Boards of directors are considered as important mechanism for reducing transaction costs associated with environmental interdependency.C. Corporate governance will be to employ or design techniques or systems that can secure the interests and values of the management.D. The system of CG should be designed to minimise agency problems & costs.
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(iii) Which threat can possibly…
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es
Question 28
The COSO model for internal control lists five specific areas encompassed
by the control environment component. Which of the following is not an
element of the control environment?
O Risk assessment.
O Assignment of authority and responsibility
O Integrity and ethical values.
O Organizational structure.
sulzilZa
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ning Objective 1
S8-1 Defining internal control
Internal controls are designed to safeguard assets, encourage employees to follow
company policies, promote operational efficiency, and ensure accurate accounting
records.
Requirements
1. Which objective do you think is most important?
2. Which objective do you think the internal controls must accomplish for the busi-
ness to survive? Give your reason.
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Question 6: How can a firm assess risk and how can internal controls systems help minimize the financial risk?
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Essay Question: (LO# 2)
One of the Components of Internal Control is the control activities; which are the policies and
procedures that help ensure that necessary actions are taken to address risks to the achievement
of the entity's objectives. What are the most important control activities (Explain of each of these
control activities)?
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Enterprise Risk Management
The table below refers to seven industries.
Required:
For each industry, provide an example of a business risk faced by companies that compete within that industry. Then, describe an example of a control that could be used to reduce the business risk that you have identified.
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QUESTION ONE (1)
1) To implement its risk management framework, Quantum Commodity, a cocoa
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functional unit. As one of the risk champions, your unit manager (risk owner) has
assigned you the following tasks:
i. Identify the top six (6) significant risks
ii. Conduct a qualitative analysis and prioritize each risk
iii. Develop a basic risk register
b) Quantum Crude Limited, a Ghanaian Bulk Oil Distribution Company (BDC),
plans to import 20 million barrels of crude oil within the next 12 months. The
current exchange rate is 1 USD = 15.50 GHS, and crude oil is priced at $120 per
barrel. The company has obtained a loan in Ghanaian Cedis, repayable over 60
months, to partially finance this import. With global trends suggesting rising oil
prices and further depreciation of the Cedi, and in light of the recent increase in
the monetary policy rate (MPR) by the Bank of Ghana's Monetary Policy
Committee (MPC), as well as…
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A Conceptual
B Interpersonal
C Analytical
D Technical
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Question 6
Which of the following are elements of a CPA firm's quality control that should be considered in
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1.) Engagement Performance 2.) Relevant Ethical Requirements 3.) Monitoring
1. Yes No Yes
2. Yes Yes Yes
3. No No Yes
4. No Yes Yes
O 3
O 4
O 2
O 1
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Describe how this principle is important in risk management.
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Related Questions
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Recommended textbooks for you
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage Learning
Auditing: A Risk Based-Approach (MindTap Course L...
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ISBN:9781337619455
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Publisher:Cengage Learning