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Risk Management Strategy: The Westpac group

For this assessment, you will need to perform the following task. This task will need to be completed and submitted in a professional, word processed, format, and must be 1000 words minimum in length.

  1. Your task is to develop a risk management strategy for your financial service or one that you would like to work for. To do this you will need to:
    1. Analyse the risk factors for financial investment and insurance products in that service
    2. Determine the appropriate risk exposure management strategies
    3. Communicate these strategies to relevant staff and intermediaries
    4. Personally manage the risk assessment strategies
  2. This assessment is aimed at setting a strategy for portfolio managers, including what types of business will be targeted and not targeted.
  3. In your strategy you will need to consider the following before you develop the risk management strategy:
    1. All relevant legislation, standards, regulatory guidelines and industry sector compliance requirements. For example:
      1. Insurance Act 1873
      2. Insurance contracts Act 1984
      3. Corporations Act 2001
      4. The Australian Banking Association Code of Practice
      5. ASICS finance related consumer protection regulations and licensing regulations and restrictions for financial services providers
      6. Com Law – for all other Finance Related Legislation
      7. Financial Transaction Reports Act 1988 (Cwlth)
      8. Anti-Money Laundering and counter-Terrorism Financing Act 2006 (Cwlth) (AML/CTF Act)
      9. Credit Act 1985 (Cwlth) and Consumer Credit (Victoria) Act 1995
      10. Cheques Act
      11. Financial Services Reform Act
      12. Superannuation Industry (Supervision) Act
      13. Australian Prudential Regulation Authority Act 1998
      14. Australian Securities and Investments Commission Act 2001
      15. Financial Management and Accountability Act 1997
      16. Financial Sector (Shareholding) Act 1998
      17. National Credit Act
      18. Payment Systems and Netting Act 1998
      19. Australian Corporations Act 2004
      20. Australian Taxation Act
    2. Organisational policy, procedures, guidelines and authorities related to risk management (you may need to determine the performance targets of the organisations capacity to assess and accept risk)
      1. Performance targets may be related to:
        1. Compliance with legislation and regulations
        2. Consistency of the application of risk assessments
        3. Compliance with organisational policies and procedures
        4. Risk mitigation figures
        5. Levels of risk that are undertaken by the organisation
        6. Percentages of risk undertaken
        7. Strategy application for risk management
    3. Relevant risks, including the high and low hazard financial and legislative risk areas. (you will need to access the Australian risk management standards to complete this section)
      1. Areas that are considered to be low risk will have been assessed to have:
        1. Minimal risk exposure
        2. Be compliant with current market conditions
        3. Within the organisations accepted level of exposure
      2. As high hazard risk areas are those that may result in:
        1. Breaches in compliance
        2. Financial loss
        3. Loss of market sector
        4. Loss of other resources
        5. Damage to public relations
        6. A range of other high risks
    4. Actuarial and financial principles and processes related to risk exposure strategies
    5. Relevant industry hazards
      1. Within the financial industry there are a range of different industry hazards and specific risk exposures that may be related to a range of business activities including:
        1. Financial
        2. Business continuity
        3. External
        4. Internal
        5. Marketplace
    6. Relevant risk exposures and an evaluation of those risks and hazards (you will need to identify your organisation’s business risk elements and control risk elements)
      1. Risks that products and services may cause may include:
        1. Financial
        2. Inability to recoup monies spent
        3. Organisational image
        4. Public relations
        5. Compliance issues
    7. Determine compliance factors and requirements
    8. Develop appropriate risk mitigation strategies
    9. Establish the risk assessment criteria
  4. To perform these tasks you will need to identify and collate all up-to-date information in a form that is suitable for analysis and then begin a review on this information.
  5. You will need to consider the known exposure factors and evaluate the risk acceptability factors within the context of mitigating capabilities and organisational requirements.
  6. Once you have done this you will need to:
    1. Develop risk acceptance and rejection criteria
      1. Risk acceptance and rejection criteria will be based on:
        1. Level of Risk: The potential of a negative outcome occurring.
        2. Magnitude: The word magnitude in relation to financial risk speaks to the size and extent of the financial risk to the organisation.
        3. Volatility: The word volatility in relation to financial risk speaks to the level of uncertainty and amount of likelihood to change and by how much the risk is likely to change.
      2. It is essential to ensure that a range of strict terms and conditions are created for the risk acceptance of risk factors that are deemed to be high risk and these may include:
        1. Strict risk assessment procedures
        2. Obtaining legal advice
        3. Parameters of risk acceptance
        4. Variables that are acceptable
        5. Variables that are not acceptable
        6. Approvals processes
        7. Information collection processes
        8. Compliance procedures
        9. Mapping of legislative and regulatory requirements
        10. Careful design of contingency plans
        11. Roles and responsibilities
        12. Accountability practices
        13. Percentages and variants of risk
        14. Practices for diversifying risk
    2. Identify high and low hazard financial and legislative risk areas
    3. Develop appropriate risk mitigation strategies which may include:
      1. Policies and procedures change
      2. Change management strategies
      3. Implementation of contingency plans
      4. Altering actions to make up for damages causes by risks
  7. It will then be necessary to document a clear outline of the risk acceptance strategy including:
    1. Purpose of the risk acceptance strategy
    2. Guidelines of the strategy
    3. Purpose of risk acceptance criteria
    4. Management structure of the framework
    5. Related policies
    6. Related action plans
    7. Related procedures
    8. Information related to how the risk acceptance strategy will be made accountable
    9. Resources
    10. Templates
    11. Reporting structure
    12. Recording structure
    13. Learning and development opportunities
    14. Review and monitoring structure
  8. Then you will need to get feedback on and finalised the risk acceptance criteria. If you are not in a workplace you will need to ask your trainer/assessor to give you feedback on your work.
  9. To complete this assessment you will require access to the following:
    1. Office equipment, technology, software and consumables
    2. Relevant legislation, regulations and codes of practice
    3. Relevant Australian standards relating to risk management
    4. Organisational and industry risk management documentation

Answer

Risk Management Strategy

Analyze the risk factors for financial investment and insurance products at Westpac Group

There are several risk factor that any financial investment and insurance products company is exposed to. These risks involve credit risk, liquidity risk, governance risk, development risk, operational risk and strategic risk. The Westpac group is also exposed to these different types of risks where the customers of the finance company relate credit risk to the risk of financial loss resulting out of a failure to meet the financial obligation (Bank Australia, 2015). Then there is liquidity risk related to the risk when the company is unable to fund assets and meet obligations while governance risk is related with rules, policies, procedures and regulations that define the operational administration and management of the company. Here the focus is on management of risk and its compliance (Australian Government, 2017). The development risk is a category covering various risks related to promotion and communication of the products and services to potential customers and operational risk is related to loss due to failure of internal processes (Bank Australia, 2015). Finally, the financial investment and insurance products companies like Westpac group are exposed to strategic risk covering the potential loss resulting out of carrying with an unsuccessful corporate strategy. There is a need for the company to focus on each of these risks while defining the strategy of managing risk at the company. 

Determine the appropriate risk exposure management strategies

The risk exposure management strategy will focus on focusing on the most important risks that can prove to be high in hazard for the company. There needs to be a more risk averse culture introduced across the organization by steering away from buying the risky instruments. The risk management strategy should be applied across the organization through a decentralized decision making model with centralized ownership of the process (Santomero, 2012). This will ensure a safeguard against unwanted risk and a better approach towards following processes of risk management. Further the strategy is to drive the process through clear roles and responsibilities where every individual across the organization is responsible to identify any possible risk and ensure avoidance of any high hazard risk for the company (Westpac Group, 2018). Moving ahead it is to be noted that there is a need of consistent and rigorous assessment of risk along with the quantification of the net benefits. Such a strategy is necessary to lessedn the chances of failures and avert the risk associated with dealing with complicated instruments. 

It is also required that It systems are used to facilitate the process of risk management. With the increasing value of IT there is a need to develop systems that are driven by users and help in timely control and monitoring the compliance of various regulations and legislation associated with the industry. 

Finally, the risk management strategy of the company will focus on developing and maintaining a culture of risk management through adequate training sessions dealing with corporate risk management, through effective communication and discussion on status of risk management through management review meetings and adding incentives and performance guidelines. Here, the accountability should be increased by defining explicit incentives and performance metrics related to management of risk and incoproate specific goals of managing risk within the performance evaluation procedures (Mehrban 2010). 

Communicate these strategies to relevant staff and intermediaries

The communication of risk management strategies will be achieved through clear and effective communication defined specifically for different parties. Here strategies will be communicated regularly in a well-engaged manner to avoid any miscommunication and avoid any forgotten communication (Mehrban, 2010)). Here the process will start with listing of the audiences like employees and intermediaries at the company. The communication will be done through Emails and newsletters with a reinforcement carried on through notice boards and regular activity on social media. Further informal discussions will be encouraged between managers and staff members acting as a source to avoid any miscommunication and getting an idea of understanding of strategies by the staff members working at various levels across the organization. 

The plan of communication will be based on objectives of communication like for staff members the objective is to ensure risk avoidance and early identification of any risk to take necessary steps. On the other hand for the intermediaries the communication objective is to build trust between the company and the intermediaries to ensure long-term association. 

It is also necessary that a regular check be maintained on the effectiveness of communication plan (Santomero and Oldfield, 2012). This will be endured through informal communication and team meetings will staff members and regular formal discussions with the CEO in open-house meetings. This will help in understanding the way message is received by every individual and get recommendations from him or her in order to make the communication of strategies even more effective in future. 

As a final step the recommendations received from the staff and intermediaries will be applied to make the communication even more effective and easy to grasp for the stakeholders to risk management plan. This will ensure that the communication plan is made in consultation with team members and intermediaries ensuring clarity of objectives in place (Santomero and Oldfield, 2012). 

Personally manage the risk assessment strategies

The risk assessment strategies will be managed on the detailed analysis of previous situation, current situation and the projects future situation. Here the key focus will remain in creating documents as per the cost and benefits expected, contingency planning, work breakdown schedule and goals and objectives. The plan for management or risk assessment strategy will comprise of three key steps namely, reviewable of intended outcomes, information collection and measurement of success. Such a process followed by communication of results from reviews and evaluations will ensure relevant follow up actions for appropriate and efficient implementation of risk exposure strategies across the organization.

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