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Complete 3 page APA formatted essay: Risk Management Failure.Financial markets are thus both risky and profitable. However, Companies can avoid the risky part of the financial markets through risk man
Complete 3 page APA formatted essay: Risk Management Failure.
Financial markets are thus both risky and profitable. However, Companies can avoid the risky part of the financial markets through risk management (Jordão & Sousa, 2010). The paper explores the importance of risk management in business and thus uses Bear Stearns Companies, Inc. to express the impacts of improper use of risk management.
Risk management is a process, which involves both external and internal analysis and thus comprise of several strategies. It is a constantly changing process and evolves with the company and its business. The process commences by identification of the risks that are facing the company. After their identification, the company needs to understand their importance and relation to the industry trends, competitors, suppliers, management, customers, its products, balance sheet, and its place in the business. The company also needs to consider its stakeholders and their tolerance and objective to the risks. Once a company understand risks and consider all the necessary factors, it can then apply appropriate strategies. It can put up measures that tackle the problem or accept all the risks and consequently the likelihood of losses. It can put measures that tackle apart of the problem through hedging a part of the exposures or by hedging all possible exposures (Moosa, 2007).
Bear Stearns Companies, Inc. was a worldwide investment bank, brokerage, and securities trading firm that went out of business in 2008 due to the global recession and financial crisis, which led to its acquisition by JPMorgan Chase. Before its collapse, its key business areas were wealth management, capital markets broker, and worldwide clearing services. Before 2008, Bear Stearns involved itself in a heavy securitization. It offered large volume of assets-backed securities. Even though investor losses increased in the period between 2006 and 2007, Bear Stearns continued to
