Credit Risk : It Is Primarily The Loss

* The company has sufficient liquidity to finance ongoing operations without taking on additional debt.

Is that make loans or buy bonds with long maturities are relatively more exposed to credit risk. Foreign exchange risk, is the risk that exchange rate changes can affect the value of an FI’s assets and liabilities denominated in foreign currencies. FIs can reduce risk through domestic-foreign activity. Liquidity risk, is the risk that a sudden and unexpected increase in liability withdrawals may require an FI to liquidate assets in a very short period of time and at low prices. Can be day-to-day withdrawals by liability holders are generally predictable. And are usually large withdrawals by liability holders can create liquidity

This is a company that has good financial strength and should be able to meet any unexpected short term debt. During this current period of economic uncertainty, the ability to meet unexpected downturns is an advantage that many other companies do not possess.

Lawsons’ liquidity ratios may be alarming to the bank. The company’s ability to repay short-term debt has significantly deteriorated over their four year span to the point where the company is almost unable to operate. This is defiantly a fragment of the company that the bank will have to take a deeper analysis on.

The following financial data illustrates the firm’s short-term ability to pay maturing obligations and to meet unexpected needs for cash:

The short term liquidity position for the company peaked in FY09, which was still disturbing as it stood below 1X the ability to meet its short term liabilities. The dip for FY10 is again due to a decline in its cash and cash equivalents, or quick assets, which were utilized to pay taxes. The cash ratio and quick ratio follow a similar pattern and are at levels which put the company at risk, as well as major stakeholders.

2) The amount and nature of the company’s liabilities, including the degree of reliance on short-term funding.

Liquidity risk is the risk that the Company will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

With respect to the company's balance sheet, the company is in a decent financial position despite the losses. In terms of liquidity, the company has remained liquid

Risk management is the term applied to a logical and systematic method of establishing the context, identifying, analyzing, evaluating, treating, monitoring and communicating risks associated with any activity, function or process in a way that will enable organizations to minimize losses and maximize opportunities. (Lecture notes)Risk Management is also described as 'all the things you need to do to make the future sufficiently certain'. (The NZ Society for Risk Management, 2001)

The long-term liquidity risk ratio such as LT debt/Equity, D/E, and Total Liabilities to Total Assets all show a decline from year 2005 due to the repayment of debts. The interest coverage ratio also shows a healthy number of 29.45 in comparison to the industrial average of 15.04 indicating a high ability to pay out its interest expense. Such a low relative risk is not surprising due to the nature of its business depending heavily in R&D development and large intangible assets.

that the company is in a relatively strong liquidity position. At the end of the review year, the company had total

The successful management of financial institutions (FIs) demands an understanding of the relevant structures, operations, and the associated risks. In particular, the assessment of the risks is necessary to make the appropriate steps to maintain the solvency of FIs (Saunders & Cornett, 2007). One of the steps involves the application of off-balance sheet (OBS) activities. OBS refers to the properties of the FI which are considered assets, but which do not feature in the balance sheets and thus are not used in balancing the ledger (at most, they may appear at the bottom of the balance sheet). OBSs are extremely useful since they often assist in leveraging the commercial banks in times of crisis, especially when the financial markets are

One well accepted description of risk management is the following: risk management is a systematic approach to setting the best course of action under uncertainty by identifying, assessing, understanding, acting on and communicating risk issues. In order to apply risk management effectively, it is vital that a risk management culture be developed. The risk management culture supports the overall vision, mission and objectives of an organization. Limits and boundaries are established and communicated concerning what are acceptable risk practices and outcomes. Since risk management is directed at uncertainty related to future events and outcomes, it is

And the company is suffering from liquidity challenges because it is not in a position to finance its day-to-day activities, so its bank account stands over drawn. This situation has impacted negatively on the company's ability to repay its earlier loans and customers are upset because of delayed delivery.