FINANCE - FINANCIAL THEORY

2 briefing papers



2 briefing papers

Briefing Paper No. 1

Financial markets are the one that provides the mechanism to the participants to fulfil their financial needs. Financial markets play a vital role in an economy. One of the important role financial markets plays is that because of their presence in an economic structure allow market participants to decide the price of the financial offerings made by various institutions and corporations.

The challenges which are faced by HSBC is to uncover the saving money structure that will ensure their prosperity in the industry. In spite of the extensive development of the venture keeping money industry, the perfect working model formed by Goldman Sachs and Morgan Stanley is still dependent upon a 'one-bank' structure with courses of action to back it.

To change any bank, particularly investment banks, into a venture managing an account contender are an exceptionally terrible procedure. In spite of the fact that the procedure is an anguishing one, the 'one-bank' model is constantly received by numerous banks in the US and Europe.

The financial markets are broadly segregated further into two I.e. money markets and capital markets(Ross et al. 2008, p.23). Money markets are the financial markets that deal with the financial securities that have a maturity of less than a year. For example, T-Bills, Certificate of Deposit, etc. However, capital markets are opposite to money markets i.e. it allows market participants to trade financial instruments that have a maturity longer than a year. Instruments such as shares, corporate bonds, etc. are traded in capital market. Organizations usually face number of risks. One of the most important risks is financial risk. Financial risk is a chance of organization being defaulting at its financial obligations (Laeven and Levine 2009). The firm's inability to manage its financial risk can expose it towards bankruptcy.

The organization's total risk is an accumulation of business and financial risk. The combination of both determines the probability of bankruptcy.

Risk Governance

Risk governance is the sequential process that helps in mitigating the risk by the cooperation of the organization. However, sometimes organizations do not focus on the risk management, therefore, such organizations face loss and heavy downfalls dur to the occurrence of uncertain risks. The activities of the organization are affected by the risk that naturally exists in the market. The technological risk is the major risk that results in the failure of the organizations (Mishkin 2004, ...