Risk management in international banking insurance and finance

Document Type:Essay

Subject Area:Finance

Document 1

The Theoretical Value of Liverpool Victoria Group Risk Management Activities According to Smithson, & Simkins (2005), risk management activities play a pivotal role in predicting the possible opportunities and drawbacks that might limit the capacity of an organization to achieve their objectivities. The business environments are characterized by market uncertainty due to the micro and macroeconomic factors which might adversely affect the performance of an entity. The existence of uncertainty makes it imperative for organizations to formulate methodologies that make it possible to create a tool which looks into their operations and determine both their propensity to take risks and how to mitigate losses from the occurrence of a risky eventuality. The employment of strategic risk management activities entrenched in the organizational culture enhances shareholders value by preparing their business model on how to approach different market segments with substantive caution.

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Figure 1: Competitive value of the organization Shareholders value will be tremendously increased through the application of risk management initiatives that provide a foundation for growth irrespective of market dynamism in the competitive business environment (Bartram, 2000). The immeasurable nature of the value of risk makes it difficult to ascertain the effectiveness of management initiatives aimed at maintaining a positive growth trajectory (Mikes, & Kaplan, 2015). The understanding of the theoretical value of risk management to an organization should be reviewed on the basis of the underlying costs from failure to mitigate risks. The cost of risks includes deadweight costs arising from events such as loses of profits due to erosion of value on assets in cases of asset devaluation and loss of goodwill. The costs arising from failure to implement risk management initiatives deny an organization the opportunity to grow and expose them to substantive loses.

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The growth of business depends on their ability to approach market segments with confidence and preparation that informs their risk tolerance levels (Smithson, & Simkins, 2005). The system provides a mechanism for designing a structure that would deliver a mechanism which looks into the cost-benefit perspective on different projects to determine the efficiency of the model. Risk appetite requires an analysis of the risk tolerance and development of a cost-benefit matrix to determine whether a project would warrant the commitment of their resources. The development of risk assessment tools and policies enable an organization to create a risk culture embedded on the underlying market conditions to establish their risk profile as a guiding factor in their investment decisions (Mikes, & Kaplan, 2015). Enterprise Risk Management initiatives employed by Liverpool Victoria Group deliver incredible input in improving the organizational efficiency through the facilitation of proper planning.

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The performance of Liverpool Victoria Group business extensively depends on their preparation and expertise in manoeuvring across the risk volatility in their business enterprises. d. The Risk Appetite frameworks of the Liverpool Victoria Group are inspired by the desire to undertake calculated risks that would prevent any possible loss of shareholder’s value. The risk appetite frameworks are efficient when it comes to establishing a model that offers guidance on creating a cost-benefit mechanism of evaluating different investments strategies. The enterprise risk structures of the entity are designed to deliver a model that looks into markets from the perspective of the set risk appetite thresholds by the entity. Liverpool Victoria Group benefits from the oversight established by their corporate governance system to determine their propensity to undertake risky business across market segments.

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The corporate governance system takes cognizance of the different vulnerabilities open when executing their risk appetite coined across different strategic decisions (Sheedy et al. The corporate governance arrangements have set out an organizational risk threshold for the entity to develop strategies based on their capacity to hedge against the possibility of failure. The corporate governance system of the organization ensures compliance with risk standards set out in defining organizations decisions concerning their operations and investment portfolio. The corporate governance oversight tasks seek to cushion the organization to operate on a trajectory that would support the enhancement of shareholders’ value. The corporate governance arrangements offer an advisory role on several market dynamics to influence organizational decisions for effective enterprise risk management procedures (CRO Forum, 2013).

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The corporate governance arrangements established a system that guides the employment of an organizational risk threshold as an initiative to evaluate strategies centred on their aptitude to hedge against the underlying risks in their operations. Conclusion In conclusion, it is imperative to underscore the effectiveness of Liverpool Victoria Group enterprise risk management activities and support of their corporate governance in advancing their growth objectives. The performance of the organization indicates the significance of their risk culture and structures since the entity has maintained steady growth over time. The annual report demonstrates the structure of the risk committee that operates under the strategic tools to identify, assess, and mitigate their levels of exposure across market segments (The LV= Annual Report, n. d.

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