Financial strategy Essay Example | Topics and Well Written Essays - 1500 words

Financial strategy - Essay Example It is however, critical to understand that such balancing act often depend upon the firm’s choice of the risk level which it attempts to undertake. (Walsh, 1996), As such the growing firms may be more risk loving and willing to take on higher level of risks and therefore all their decisions to expand and develop their markets will be based upon the higher degree of risk firm is willing to assume. Similarly, if a firm is more mature and risk averse in nature, its overall strategies will be relatively different as compared to a growing firm. (De Wit, & Meyer,1998). This paper will attempt to argue and explore that a firm’s overall risk consciousness governs the underlying strategies of the firm. The concept of Risk and firm The question of whether risk is the major factor behind the strategy formulation or not need to be discussed from the different perspectives. Each organization operates in an environment which is both internal and external to it and therefore develops its strategies in accordance with its environment. Firms, to a large extent, develop their capabilities to deal with the risks arising from their internal environment however; it’s the external competitive landscape of a firm which poses it significant and important risks because of the volatile and uncontrollable nature of the external environment. The overall development of the risk consciousness of the firm therefore largely depends upon the kind of external environment faced by the firm and how firm can actually utilize its strengths to withstands such external risks Risk as a concept therefore outlines that the outcome of any decisions or strategies of a firm may not be exactly according to what is perceived by the firm. As such it becomes critically important for the firms to account for and plan risks and develop strategies which can help them to counter risks arising from their internal as well as external environment. It is this uncertainty of the external environmen t which firms need to account for and prepare themselves through proper planning and strategy formulation process. It is also important to understand that the overall risk factors in an external environment can be diverse however; normally firms perform PESTLE Analysis to analyze their external environment. PESTLE Analysis allows the firms to actually evaluate the impact which political, economic, social, technological, legal and environmental factors could have on the firm. (Ellis, & Williams, 1993) If a firm has relatively high tolerance for the risk, it may choose to work in an environment which can be politically volatile and uncertain. For example, any firm willing to operate in Afghanistan now must have relatively higher tolerance for the risk because of volatile and extremely uncertain political environment. As such its policies and strategies will be driven by the volatility of the external environment within which it is operating or willing to operate. Risk and Return Risk and Return criteria serves as the basic premise under which all the economic decisions are made. Every investor as well as the firm attempts to decide and take actions based on their overall risk and return profile.

Student Loans; How banks manage them and how they affect individual Term Paper - 1

Student Loans; How banks manage them and how they affect individual spending - Term Paper Example ay for college education that they cannot afford creates a situation in which a slowed job market will be unable to absorb these individuals and provide the necessary debt payments that these loans necessitate. Accordingly, the rate of default during any future slowdown in economic growth could be so profound that these individuals will contribute to a secondary crisis that could be far worse than the mortgage-backed security crisis that took place during 2007/2008. Yet, rather than focusing an entire analysis upon the potential for hardship that exists due to the way in which student loans are managed and given out, the following analysis will specifically focus upon the way in which banks manage student loans, the potential for distress that this style of management creates, and the individual hardship that student loan/debt repayment creates for a recent graduate and their overall Outlook for earnings during their lifetime. It is the hope of this author that such a level of discus sion will be beneficial with respect to engaging a further level of appreciation with regard to the issue of student loans, how they are managed, and how this form of debt impacts upon individuals within the current era. One of the most interesting ways in which the reader can come to appreciate the similarity between the mortgage-backed securities that contributed to the 2007/2008 financial hardship as compared to the issue of student loan debt creation and repayment has to do with the similarity of financial structure; specifically with regard to the way in which these student loans are packaged in bulk and sold within equity markets. In almost an identical manner to the way in which banks manage mortgage-backed securities and bought and sold these as an asset, the financial system is currently performing much the same process with respect to student loan debt. This is not a new concept. Instead, packaging debt and selling it to investors that place a premium upon whether or not