Answer To: Afin8067 International Financial Management Syndicate Report Group Component (20%) Groups must be of...
Abhishek answered on Nov 02 2021
Running Head: INTERNATIONAL FINANCIAL MANAGEMENT 1
INTERNATIONAL FINANCIAL MANAGEMENT 5
AFIN8067 INTERNATIONAL FINANCIAL MANAGEMENT SYNDICATE REPORT ANZ BANKING GROUP
(PART 1: GROUP ASSIGNMENT)
Table of Contents
Introduction 3
International Financial Risk Management Tools 3
Types of Financial Risks 3
Commodity Risk 4
Currency Risk 4
Interest Rate Risk 5
Liquidity Risk 6
Political Risk 7
Credit Risk 7
Conclusion 8
References 9
Introduction
Recent global financial crisis and rising competition has made the market volatile to financial risk. Poor Management processes at the banks can lead the financial institution such as ANZ Banking Group to huge financial loss. Other risks such as growing complexity in the financial market and innovation have led the financial risk management to the forefront of the discussion.
International Financial Risk Management Tools
Unpredictability in the market, high fluctuation in the currency rates, price variation gives a possibility of financial loss (McDougall, 2016). It is very important to eliminate these risks completely to remain in the business for ANZ Banking Group. The Financial risk management gives an opportunity to ANZ Banking Group to understand and identify those different kinds of challenges and risks. After the identification, it is the responsibility of ANZ Banking Group to solve those issues. Solving issues will not only eliminate the possibility of financial losses but also give an immunity to market fluctuations.
Types of Financial Risks
Financial Risk is a type of risk that deals with the possibilities of any kind of capital losses by any financial institution. Financial loss will happen when the financial institutions such as ANZ Banking Group will not have adequate cash to meet its financial requirements. Therefore, Financial Institutions such as ANZ Banking Group take many steps to mitigate the financial risk from affecting them. Implementing the Financial risk management in the system will help ANZ Banking Group to increase the efficiency in the system.
For stable and sustainable growth of ANZ Banking Group (Mishchenko, Naumenkova, Ivanov & Tishchenko, 2018), it needs to deal with the volatility and market fluctuations. It is only possible if ANZ Banking Group is able to implement an efficient financial risk management framework, which can detect or identify the issues and make decisions or protocols to deal with the issues. Some of the major financial risks, which ANZ Banking Group is to identify, if they want stable and sustainable growth, are:
Commodity Risk
Commodity risk is a type of risk that gives a possibility that if the commodity price changes will cause harms directly or indirectly, such as huge financial losses for ANZ Banking Group. This happens when the price of a commodity increases or decreases at a point where a buyer is unable to buy that commodity or producers to sell the commodity. Heavy fluctuations in the prices due to the uncertainties in the market are the major factor of commodity risk. Commodities can be considered such as metals, livestock, oil, cotton, electricity, grains and gas (Kavassalis, Stieber, Breymann, Saxton & Gross, 2018).
Fluctuation of prices of the commodities will not help ANZ Banking Group to have stable growth. To avoid such issues ANZ Banking Group can adopt a probability approach, which will give analysis known as “Value at Risk” (VaR’). Using this approach will give ANZ Banking Group a huge competitive edge over other financial institutions. This approach analyses the past price history of the commodity price.
Analysing the past price history of the commodities, it applies this information or data into the...