Risks Facing Financial Insitutions Essay Example | Topics and Well Written Essays - 2500 words

Risks Facing Financial Insitutions - Essay Example alth and wealth of such financial institutions. (Aharony, 1986) Its 1988 Basel Accord deals with credit risk and has extensively guided international banks in their risk management.Similarly the Basel II(International Convergence of Capital Measurement and Capital Standards) deals with the problem of operational ,legal and strategic as well as those arising out of the loss of goodwill. ( Hsaio 2008) , This paper therefore discusses the risks faced by modern financial institutions,international efforts to resolve such risks as well as the techniques used by banks to calculate interest risks. The past two decades have indeed seen an increased banking response to the systemic risks in the financial system which emerged in response to the 1930's banking crises of the 1930s.Banks and other financial institutions perform the functions of financial intermediaries that distinguish them from other businesses. They intermediate liquidity between economic subjects and in this process face a number of risk atypical of non-financial firms. (Aharony, 1986)This financial risk measurement and management becomes very important for banks than for other companies.The modern financial institutions are very complex as they increasingly offer fee-based financial services and relatively new financial instruments and this has led to the creation of a number of new risks.Essentially the riskier the bank's business, the more capital it should hold to be able to cover future fiscal losses. Although various banks face different risks (with regards to their category) some risks are common to most banks like Credit risk , Liquidity risk , Solvency risk , Operational risk , Market risk and Interest rate risk. (Aharony, 1986) In the above paragraph a number of risks have been identified and while many of them have been overcome by regulation many still sting the face of financial prudence as unresolved dilemmas. (Aharony, 1986) These are risks like operational risks (which have been defined by the Basel Committee(Basel II) as arising from 'inadequate or failed processes, people and systems or from external events'. ( Hsaio 2008) , Operational Risks cover a wide category of risks which pertain to human error or technical deficiencies.(Black,1972) and are related to all other types of risk such as capital needs, inflation, concentration of revenues (by customers, products, geographies, etc.) new competitive conditions and environmental remediation obligations(reinforced by the new concept of Corporate Social Responsibility).(Black,1972). Operational risk is the newest area of focus in the the arena of the financial institutions but there are theoretical and practical difficulties involved in it's assessment as well as statistical irregularities in the data available. ( Hsaio 2008) , However more serious risks pertain to losses which arise due to the failure of the obligator to perform(Credit Risk) and such losses are reported to be responsible for more

Case Study Research Assignment Paper Example | Topics and Well Written Essays - 1500 words

Case Study Assignment - Research Paper Example These alterations threaten to transform the global environment. As one author imagined it, â€Å"The year is 2035. In New York, palm trees line the Hudson River †¦ Phoenix is in its third week of temperatures over 130 degrees †¦ Holland is under water. Bangladesh has ceased to exist †¦ in central Europe and in the American Midwest, decades of drought have turned once fertile agricultural lands into parched deserts (Rifkin, 1988).† Composition of Greenhouse Gases Methane and carbon dioxide primarily constitute the greenhouse gases. They also consist of water vapor and trace amounts of other gases including ozone, nitrous oxide, and HCFCs. Greenhouse gases â€Å"trap† some of the sun’s infrared radiation within Earth’s atmosphere, similar to a greenhouse. As the levels of greenhouse gases in the atmosphere increase, they trap more of the sun’s heat in the earth’s atmosphere, which has a number of effects on the earth’s env ironment. Were it not for greenhouse gases, most of the sun’s energy would radiate back out into space, leaving the earth cold and lifeless with an average temperature of minus 18 degrees C (0.4 degrees Fahrenheit) (Miller). ... There is no doubt this atmospheric buildup of carbon dioxide and other greenhouse gases is largely the result of human activities. Combined with unnaturally elevated levels of naturally occurring gases, global warming is exacerbated by anthropogenic emissions of additional greenhouse gases into the atmosphere. To illustrate the problem, under pre-Industrial Revolution conditions, global levels of carbon dioxide were around 275 parts per million (ppm). Carbon dioxide levels increased from 275 ppm to 346 ppm between 1860 and 1986, primarily due to the burning of fossil fuels and deforestation (Flavind & Tunali, 1995). Plants convert carbon dioxide to oxygen and are one effective way to absorb carbon dioxide from the atmosphere. Deforestation has resulted in a reduction in the carbon dioxide to oxygen conversion. It is estimated that deforestation contributes 1.0 to 2.5 billion tons of carbon dioxide emissions annually (Oppenheimer & Boyle, 1990). It is thought that global levels of car bon dioxide in the atmosphere will reach 550 ppm sometime between 2040 and 2100; however, most analysts believe those levels will be reached closer to the middle of the twenty-first century (Rifkin). It is estimated that over the next 100 years the temperature will increase about 1.98 degrees C (3.6 degrees Fahrenheit). Such a severe temperature change would most likely cause an increase in heat waves and drought, the spread of infectious diseases, and the disruption of ecosystems worldwide. Furthermore, increased global temperatures is causing the melting of ice in both polar regions, resulting in a rise in sea level, predicted by climatologists to be up