The cycle of events leading to the GFC is regularly described as a series of very bad investment decisions, leading to serious losses, which in turn created a crisis in liquidity, triggering a global credit crisis
You are required to write an essay of 3000 words (excluding table of contents, headings, index, footnotes, attachments and references) commenting on the following statement.
“The cycle of events leading to the GFC is regularly described as a series of very bad investment decisions, leading to serious losses, which in turn created a crisis in liquidity, triggering a global credit crisis.”
Given that brand organizations like Lehman Brothers, Bear Stearns, Meryl Lynch, who are no more or AIG who were effectively nationalized, all had technically excellent risk management systems, how to you explain the failure of risk management. What in your view was the role of financial engineering i.e. the use of collateralized debt products, contracts of difference and other credit derivative products in this disaster?
In your answer you are to consider the following issues:
- Initially derivative products were a risk management device, so what happened?
- The interconnectivity between operational risk, liquidity risk, credit risk and systemic risk?
- The role of Governance and non-regulatory compliance in risk models?
- What role will ISO31000:2009 play, if any, as the new global standard for risk management, in creating an environment of resilience in the global economy.
Table of content
Abstract/Executive Summary: (20 mark)
- Linkage between business decisions and risk context
- Role of financial Engineering in context shift
- How a shift in risk context can lead to crisis
- Relevant challenges for effective control of global economy
Contextual Component/ Introduction: (20 Mark)
- Coverage of background of GFC
- Emergence of credit derivatives
Risk Theme Discussion: (50 marks)
- Coverage of risk principles in theme (10 Marks)
- Identification and use of case studies of relevance to theme and any other research identified relationships (15 Marks)
- Discussion of theme with reference to the four focusing questions.(15 Marks)
- Extent of research (10 Marks)
Conclusion: (10 mark)
- Summarizes identified issues
- Summarizes relevant solutions
- Essay of 3000 words contain from :
- Abstract/Executive Summary:
- Contextual Component/ Introduction:
- Risk Theme Discussion:
- Conclusion: (10 mark)
- Extra words included for (table of contents, clear headings, index if needed , footnotes, attachments and references)
- Reference style: APA 6th edition style for both in text and Reference list
- Provide adequate & appropriate in-text referencing.
- adopt the procedure outlined
- Formatting eg font 12 size , spacing, justification, indents etc
- include Assignment title and Table of contents
- .include consistent and proper headings and subheadings
- Appropriate use of appendices and attachments, if used.