FUNDING LIQUIDITY RISK, SYNDICATION BEHAVIOR AND THE RISK CULTURE OF THE AUSTRALIAN VENTURE CAPITAL INDUSTRY

2016 ◽  
Vol 64 (05) ◽  
pp. 1279-1297
Author(s):  
ASIF IQBAL SIDDIQUI ◽  
DORA MARINOVA
Keyword(s):  
Risk Management ◽  
Venture Capital ◽  
Management Practices ◽  
Liquidity Risk ◽  
Risk Environment ◽  
Fund Managers ◽  
Funding Liquidity ◽  
Additional Funding ◽  
Risk Culture ◽  
Industry Risk

Venture capital (VC) is usually invested in high risk technology companies at their early stages of development. In response to the industry risk environment, the VC fund managers have developed a set of risk management practices appropriate for the industry which include investment syndication. Furthermore, the VC funds are supplied by individual and institutional investors with different risk profiles and investment focus, usually in finite amounts and for a limited period of time. The funding agreement between the VC firms and the fund investors combined with the limited amount and time can lead to additional funding liquidity risks as the VC funds are invested in the portfolio companies. In this paper, we develop a simple two period model from a VC firm’s perspective with funding liquidity constraints to demonstrate how funding liquidity risk can influence syndication decisions. We subsequently analyze the implication of the model, derive a set of predictions and validate them with VC investment data from Australia. The analysis shows that syndication has both instrumental function in risk management and behavioral implications on risk culture essential for addressing the emerging frontiers of sustainability risks.

scholarly journals Relationship Between Risk Management Practices and Investment Decisions in Bank of Kigali, Rwanda

2020 ◽  
Vol 1 (1) ◽  
pp. 88-107
Author(s):  
Gedion Alang’o Omwono ◽  
Kayumba Annette
Keyword(s):  
Risk Management ◽  
Credit Risk ◽  
Best Practice ◽  
Management Practices ◽  
Investment Decisions ◽  
Liquidity Risk ◽  
Market Risk ◽  
Risk Tolerance ◽  
Credit Risk Management ◽  
Risk Monitoring

The purpose of this study was to examine the relationship between risk management practices and investment decisions in Bank of Kigali, Rwanda. This study adopted correlational research design. Descriptive statistics include those of the mean, standard deviation and frequency distribution while inferential statistics involves use of spearman’s coefficient correlations. Linear regression was used where ANOVA was carried on each variable. The study found that there was a correlation between liquidity risk management, default risk management and market risk management with performance of the Banks. The study findings indicated that credit risk management (r=0.096, p<0.01), liquidity risk management (r=0.347, p<0.01), market risk management (r=0.506, p<0.01) and operational risk management (r=0.612, p<0.01) on financial performance. It however found that the Banks do not involve experts and consultants in market risk management thus recommendations were made for the Banks to revise their credit risk management policies, open up and share information with other players on market risk thus involve consultants more in their market risk management and to be more proactive than reactive in risk management. The study concluded that, risk management has a positive influence on the investment decisions and that risk monitoring can be used to make sure that risk management practices are in line with proper best practice risk monitoring policies which also helps bank management to discover exposures at early stages and make corrective actions. The study recommended that, Senior management should develop strategies, policies and practices to manage risk in accordance with the Banks risk tolerance and to ensure that the bank maintains sufficient liquidity risk cover.

scholarly journals DAMPAK MANAJEMEN RISIKO PADA KINERJA KEUANGAN BANK UMUM KONVENSIONAL DI INDONESIA

2021 ◽  
Vol 8 (1) ◽  
pp. 29
Author(s):  
Kiki Afita Andriyani ◽  
Farah Margaretha Leon
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Financial Stability ◽  
Management Practices ◽  
Liquidity Risk ◽  
Operational Risk ◽  
Interest Rate Risk ◽  
Bank Management ◽  
Conventional Banks ◽  
The Impact

<p align="center"><strong><em>Abstract</em></strong><strong><em> </em></strong></p><p><em>This study was conducted to examine the impact of risk management on the financial performance of conventional banks in Indonesia. Effective and efficient banking industry financial performance from time to time is highly expected to maintain banking financial stability itself and even the stability of a country. The increase in losses borne by banks as a result of inadequate risk management practices is a major concern of bank management and regulators. The data tested in this study is conventional bank data that listed on the Indonesia Stock Exchange during the 2015-2019 period. Data analysis using Multiple Linear Regression Model. The results show that there is a significant relationship between market risk management (NIM), operational risk management (BOPO) and liquidity risk management (LDR) with bank financial performance (ROA). Meanwhile, credit risk management (NPL) has no effect on bank financial performance (ROA). For this reason, it can be said that adequate risk management practices as demonstrated by the ratio of interest rate risk, liquidity risk and operational risk are the main driving factors for profitability for the banking sector in Indonesia</em>. <em>Therefore, bank management must mobilize resources to understand a sound risk management system which in turn will have an impact on improving the bank's financial performance.</em></p><p><strong><em>Keywords:</em></strong><strong> </strong><strong><em>Conventional Banks, Risk Management, Financial Performance</em></strong><strong>.</strong><strong></strong></p>

Scandal at Société Générale: Rogue Trader or Willing Accomplice?

2017 ◽  
pp. 1-8
Author(s):  
Russell Walker
Keyword(s):  
Risk Management ◽  
Management Practices ◽  
Organizational Structures ◽  
Class Discussion ◽  
List Type ◽  
Risk Environment ◽  
Role Of Government ◽  
Finance Minister ◽  
Key Industries

This case covers the scandal that occurred in 2008 at Société Générale when one trader, Jérôme Kerviel, lost the prominent French bank nearly €5 billion through his unauthorized trading. The case describes Kerviel’s schemes as well as SocGen’s internal monitoring and reporting processes, organizational structures, and culture so that students reading the case can identify and discuss the shortcomings of the firm’s risk management practices. The case and epilogue also describe the French government’s and Finance Minister Christine Lagarde’s reactions to the scandal (e.g., imposition of a €4 million fine and increased regulations), prompting students to consider the role of government in overseeing that healthy risk management practices are followed in key industries (such as banking) that are highly entwined with entire economies. Finally, the case encourages students—during class discussion—to critically consider whether it is truly possible for one rogue trader to act alone, which elements in a work environment enable or even encourage risky behavior, and who should be held accountable when such scandals occur. Interestingly, this case highlights a story that is not unique. Prior to Kerviel’s transgressions were the similar scandals of Nick Leeson at Barings Bank and Toshihide Iguchi at Daiwa Bank, yet history has repeated itself. This case gives students a vivid example of the dangers of internal, self-inflicted risk on organizations, and it opens a discussion on how to avoid it.After completing this case, students will be able to: Identify shortcomings in a firm’s risk management practices (i.e., processes, systems, structures) Evaluate the role and interests of governments as well as peer firms in overseeing healthy risk management practices in an industry Understand the dangers of self-inflicted risk and consider the elements in an organization (e.g., leadership, compensation structure, incentives, recruiting) that impact its risk environment

scholarly journals Risk management practices in Egypt: A comparison study between Islamic and Conventional banks

2015 ◽  
Vol 5 (4) ◽  
pp. 257-270 ◽  
Author(s):  
Hassan M. Hafez
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Management Practices ◽  
Liquidity Risk ◽  
Risk Identification ◽  
Islamic Banks ◽  
Comparison Study ◽  
Risk Monitoring ◽  
Conventional Banks ◽  
Risk Assessment And Analysis

The purpose of this research is to examine the degree to which the Egyptian banks use risk management practices and techniques to eliminate associated risks to their business. Not only has that but also to compare between Islamic and conventional banked in terms of risk management practices. A standardized questionnaire was used to cover the main aspects of risk management: understanding risk, risk management, risk identification, risk assessment and analysis; risk monitoring and risk management practices and finally the types of risks faced by the two set of banks. The study found that the most challenging types of risks facing Islamic and conventional banks in Egypt are credit and liquidity risks. Conventional banks are more efficient in risk management and use more sophisticated techniques and practices. Liquidity risk is the most prominent and vital risk for Islamic Banks.

Innovative Approaches to Building Enterprise Risk Management in Emerging Economies

2021 ◽  
pp. 133-154
Author(s):  
Ilse Patricia Lopez de la Cruz ◽  
Alasdair James Marshall ◽  
Udechukwu Ojiako ◽  
Serkan Ceylan ◽  
Fenfang Lin
Keyword(s):  
Risk Assessment ◽  
Risk Management ◽  
Emerging Economies ◽  
Management Practices ◽  
Enterprise Risk Management ◽  
Assessment Practice ◽  
Enterprise Risk ◽  
Assessment Techniques ◽  
Risk Culture ◽  
Building Enterprise

This chapter explores a very positive example of enterprise risk management (ERM) development in Mexico, set by the firm Grupo Proeza, from which valuable and highly generalisable lessons can be learned. These lessons will pertain most centrally to Grupo Proeza's techniques of ERM building, where risk management practices are used to enhance the cultural and other foundations for ERM. Of particular interest is the notion that various risk assessment techniques can be used for this purpose, which may seem counter-intuitive by reversing the formative relationship between risk culture and risk assessment practice that is more typically the focus for attention.

scholarly journals Risk Management in Rural and Community Banks: The Ghanaian Experience

2015 ◽  
Vol 2 (1) ◽  
pp. 17
Author(s):  
Justice Ray Achoanya Ayam ◽  
Gabriel S. Ahinful
Keyword(s):  
Risk Management ◽  
Financial Management ◽  
Management Practices ◽  
Empirical Studies ◽  
Liquidity Risk ◽  
Secondary Data ◽  
Primary Data ◽  
Survey Questionnaire ◽  
Community Banks ◽  
Using Data

 Despite the significance of effective risk management practices in deepening prudent financial management in Ghana's Rural and Community Banks (RCBs) there appear to be a paucity of empirical studies highlighting the various kinds of risks faced by RCBs. Such studies will enhance RCBs understanding of the extent to which Ghana's RCBs operations are affected by ineffective risk management practices. The purpose of this paper therefore is to examine the extent to which Ghanaian Rural and Community Banks deploy risk management practices in addressing the types of risk affecting their operations using data through a survey involving respondents from Rural and Community Banks and Bank of Ghana/ARB Apex bank. The study uses primary data collected through survey questionnaire from respondents sampled from the RCBs and the Bank of Ghana/ARB/Apex Bank. The research also uses secondary data collected from the ARB/Apex Bank quarterly reports on Rural and Community Banks operations in Ghana. Our empirical findings indicate that credit risk, liquidity risk, operational risk and legal /regulatory risk are the major forms of risk affecting rural and community banks in Ghana. The paper recommends the enforcement of risk management regulations by the ARB Apex Bank and the Bank of Ghana. On the other hand, Rural and community banks should create risk management department and recruit qualified and experience personnel to ensure effective and efficient risk management practices. The research focused on Rural and Community Banks in Ghana and as such the results may not necessarily represent RCBs in other countries.

scholarly journals Towards Managing Firm Performance through Enterprise Risk Management Practices and Staff Competence: An Empirical Study from the Banking Sector

2021 ◽  
Vol 3 (3) ◽  
pp. 32-45
Author(s):  
Habil Slade Ogalo
Keyword(s):  
Risk Management ◽  
Firm Performance ◽  
Knowledge Sharing ◽  
Management Practices ◽  
Banking Sector ◽  
Enterprise Risk Management ◽  
Enterprise Risk ◽  
Risk Culture ◽  
The Relationship ◽  
Risk Knowledge

This study was aimed to measure the impact of enterprise risk management practices on firm performance following the moderation of staff competence. The present study proposed five hypotheses, three direct and two moderating. For measuring hypotheses and objectives, the current research targeted bank officers in the Kingdom of Bahrain's banking sector. A total final sample of 349 was used in primary analyses selected through simple random sampling. Current research shows significant positive effects of risk culture and risk knowledge sharing on the firm`s (financial and non-financial) performance of banks in the Kingdom of Bahrain. Similarly, the first moderation strengthens the relationship between risk knowledge sharing and firm performance through staff competence. In addition, the second moderation hypothesis does not strengthen the relationship between risk culture and firm performance with the moderating effect of staff competence. The current research findings are supported under the resource-based view with several theoretical and practical implications for researchers and industry practitioners.

xVA: DEFINITION, EVALUATION AND RISK MANAGEMENT

2020 ◽  
Vol 23 (01) ◽  
pp. 2050006
Author(s):  
LIXIN WU ◽  
DAWEI ZHANG
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Liquidity Risk ◽  
Credit Default Swaps ◽  
Interest Rate Swap ◽  
Funding Liquidity ◽  
Credit Default ◽  
Risk Neutral ◽  
Default Risks ◽  
Rate Swap

xVA is a collection of valuation adjustments made to the classical risk-neutral valuation of a derivative or derivatives portfolio for pricing or for accounting purposes, and it has been a matter of debate and controversy. This paper is intended to clarify the notion of xVA as well as the usage of the xVA items in pricing, accounting or risk management. Based on bilateral replication pricing using shares and credit default swaps, we attribute the P&L of a derivatives trade into the compensation for counterparty default risks and the costs of funding. The expected present values of the compensation and the funding costs under the risk-neutral measure are defined to be the bilateral CVA and FVA, respectively. The latter further breaks down into FCA, MVA, ColVA and KVA. We show that the market funding liquidity risk, but not any idiosyncratic funding risks, can be bilaterally priced into a derivative trade, without causing price asymmetry between the counterparties. We call for the adoption of VaR or CVaR methodologies for managing funding risks. The pricing of xVA of an interest-rate swap is presented.

SEC proposes sweeping new liquidity risk management rules for mutual funds and ETFs

2016 ◽  
Vol 17 (1) ◽  
pp. 74-82 ◽  
Author(s):  
Michael Rosella ◽  
Bill Belitsky ◽  
Alexandra Marghella
Keyword(s):  
Risk Management ◽  
Mutual Funds ◽  
Financial Services ◽  
Management Practices ◽  
Liquidity Risk ◽  
Securities And Exchange Commission ◽  
Exchange Traded Funds ◽  
Content Type ◽  
Asset Value

Purpose To discuss a September 22, 2015 Securities and Exchange Commission (“SEC”) proposal for a set of broad and sweeping rules mandating that open-end mutual funds and exchange-traded funds (“ETFs”) develop and implement formalized and written liquidity risk management programs (“LRMPs”). Design/methodology/approach Describes the purpose of an LRMP, the six “liquidity buckets,” the nine factors that must be considered in determining an instrument’s liquidity, the need to continuously monitor the liquidity of each position, the set of eight mandated factors used to assess a fund’s liquidity risk, the requirement for a fund to define a three-day liquid asset minimum, the role of the fund’s board of directors, a separate rule permitting “swing pricing” to adjust net asset value to take into account the costs of unexpected redemptions or cash infusions, disclosure requirements, and proposed compliance dates. Findings In proposing this new program, the SEC stated that its goal was to enhance effective liquidity risk management practices by funds and thereby reduce the risk that funds will be unable to meet redemptions under reasonably foreseeable stressed market conditions. Originality/value Expert guidance by experienced financial services lawyers.

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