Risk management, optimal

Individuals continually confront a discrepancy between ever expanding and changing wants and the means that they have at their disposal, time, and income, to satisfy them. One of the consequences is the need to make constrained choices between alternatives that have uncertain outcomes. Risk is a different concept from uncertainty. Individual optimal risk management means reducing, eliminating, or fully bearing risk, after conducting a “cost-benefit” analysis. In practice, however, cognitive biases mean that many decisions are not economically rational, necessitating paternalistic government and judicial interventions. Systemic, or whole financial system collapse risk is, optimally managed using well-designed macroprudential regulatory tools. The source of this type of risk is the inherent dynamics of the financial system over the course of the business cycle, interacting with credit market negative externalities, often as in the case of the GFC, spawned by government regulatory failure

Using fund transfer pricing for comparing financial performance among business units

This study aims to demonstrate by a simplified analysis how fund transfer pricing can be used to measure financial performance taking into account the flow of resources in a bank with only two branches. The present study was developed in three sections. The first section provides information regarding fund transfer pricing and its characteristics. This is followed by a section with an analysis demonstrating how fund transfer pricing can assist top management to evaluate financial performance in a financial institutions with only two business units. Finally, the third section has the concluding remarks about the benefits and limitations of the use of fund transfer pricing. This study uses a simple version of fund transfer pricing system to address a further complex problem which is the exchange of services among business units in a decentralized organization. The analysis has shown how fund transfer pricing can be used to manage a bank, directing the efforts of branch managers.

An analysis of qualitative characteristics of management commentary reporting by New Zealand companies

The narrative section of annual reports has considerable value to its user groups, such as financial analysts and investors (Barlett & Chandler
1997; International Accounting Standards Board (IASB) 2006; Tiexiera 2004). This narrative section including chairpersons’/presidents’ statement contains twice the quantity of information than the financial statements section (Smith & Taffler 2000). However, the abundance of information does not necessarily enhance the quality of such information (IASB 2006). This issue of qualitative characteristics has been long foregone by researchers. This issue has attracted the attention of IASB (2006). Following the dearth in research in regard to qualitative characteristics of reporting this paper explores whether investors’ required qualitative characteristics as outlined by the IASB (2006) have been satisfied in the management commentary section of New Zealand companies’ annual reports. Our result suggests that the principal stakeholders’, that is, investors’ qualitative characteristics requirements have been partially met in this section of annual reports. The qualitative characteristic of ‘relevance’ and ‘supportability’ have been satisfied in more annual reports compared to that of ‘balance’ and ‘comparability’.

An era of governance through performance management - New Labour's National Health Service from 1999 to 2010

In 1997, the New Labour government inherited a ‘crisis’ in the UK National Health Service from the outgoing Conservative government. To address this perceived crisis, New Labour offered investment and, contrary to expectations, further neo-liberal health service reforms. In particular, the government extended the scope of performance management beyond financial numbers to encompass all aspects of managerial and organisational performance. Drawing on an analytics of government framework, this paper demonstrates how reforms were framed and given meaning through a framework of hierarchical accountability and centralised control. These panoptical arrangements relied on performance-management technologies of targets and ratings, which were linked to patient choice and a prospective funding system called ‘Payment by Results’. In turn, these top-down technologies disciplined knowledge, identity, and visibility and control of practice.

Essays in corporate risk management

This research investigates the factors that lead Latin American non-financial firms to manage risks using derivatives. The main focus is on currency risk management. With this purpose, this thesis is divided into an introduction and two main chapters, which have been written as stand-alone papers. The first paper describes the results of a survey on derivatives usage and risk management responded by the CFOs of 74 Brazilian non-financial firms listed at the São Paulo Stock Exchange (BOVESPA), and the main evidence found is: i) larger firms are more likely to use financial derivatives; ii) foreign exchange risk is the most managed with derivatives; iii) Brazilian managers are more concerned with legal and institutional aspects in using derivatives, such as the taxation and accounting treatment of these instruments, than with issues related to implementing and maintaining a risk management program using derivatives. The second paper studies the determinants of risk management with derivatives in four Latin American countries (Argentina, Brazil, Chile and Mexico). I investigate not only the decision of whether to use financial derivatives or not, but also the magnitude of risk management, measured by the notional value of outstanding derivatives contracts. This is the first study, to the best of my knowledge, to use derivatives holdings information in emerging markets. The use of a multi-country setting allows the analysis of institutional and economic factors, such as foreign currency indebtedness, the high volatility of exchange rates, the instability of political and institutional framework and the development of financial markets, which are issues of second-order importance in developed markets. The main contribution of the second paper is on the understanding of the relationship among currency derivatives usage, foreign debt and the sensitivity of operational earnings to currency fluctuations in Latin American countries. Unlikely previous findings for US firms, my evidence shows that derivatives held by Latin American firms are capable of producing cash flows comparable to financial expenses and investments, showing that derivatives are key instruments in their risk management strategies. It is also the first work to show strong and robust evidence that firms that benefit from local currency devaluation (e.g. exporters) have a natural currency hedge for foreign debt that allows them to bear higher levels of debt in foreign currency. This implies that firms under this revenue-cost structure require lower levels of hedging with derivatives. The findings also provide evidence that large firms are more likely to use derivatives, but the magnitude of derivatives holdings seems to be unrelated to the size of the firm, consistent with findings for US firms.

A cross-country study on trade credit supply and financial crisis

O objetivo deste trabalho de pesquisa é investigar a oferta de crédito comercial durante períodos de crise financeira em seis países diferentes: Brasil, França, Alemanha, Itália, Espanha e Reino Unido, foram utilizadas informações de empresas de capital aberto entre 2000 e 2011. A literatura internacional documenta que durante o pico de crises financeiras a oferta de crédito comercial aumenta pois as companhias usam o crédito comercial como substituto e/ou complemento ao crédito bancário, apesar de após o momento de pico esta oferta diminui significantemente porque as empresas enfrentam problemas de liquidez causado por escassez de crédito. Mesmo que somente existam evidências pontuais de que a oferta de crédito comercial aumentou durante a crise financeira global de 2008, o efeito pós-crise é perceptível durante a crise Europeia de 2011, pois as empresas europeias diminuíram a oferta de crédito comercial, também evidenciando que estas companhias estavam confrontando problemas de administração de liquidez. Em relação ao uso de crédito comercial como ferramenta de transmissão de capital, nenhuma evidência foi encontrada para provar sua existência em tempo de crise financeira.

The relationship between board of director's nationality diversity and financial performance

Companies are moving to a more international structure; going into new markets and having an increased competition in all fronts. Therefore, the practices that lead companies to a more efficient and competitive position are praised. The management of the workforce comes as one of the main concerns of companies, aiming at performance enhancing and at creating better environments that both attract and maintain the professional talents. In an increasingly international environment, companies tend to look for the specialists and best professionals, regardless of their nationality. This new structure with several different nationalities working together poses new challenges for companies. Understanding if and how a more diverse has a relationship with financial performance is the starting point for better managing this new corporate structure.

Pompidou & Pompeia: a parallel between the management strategies of two cultural institutions in the French and Brazilian contexts

A presente pesquisa foi conduzida na forma de um estudo de caso de duas instituições culturais no contexto francês e brasileiro. O Centro Pompidou é um projeto presidencial de museu financiado pelo Estado, com a missão de tornar a arte moderna em todas as suas expressões acessíveis ao público em geral. O Sesc Pompeia é um centro multidisciplinar de cultura e esporte - financiado pelo dinheiro dos impostos e administrado pela Federação do Comércio . O Sesc Pompéia é dedicado à oferta de educação informal através do cultivo da mente e do corpo. O estudo examina se as teorias de dependência de recursos e de poder podem ser utilizadas para conceituar a relação que o Centro Pompidou e do Sesc Pompéia tem com seus stakeholders financeiros. Mais especificamente, será discutido em que medida o grau de dependência influencia a estratégia de gestão das instituições. O objetivo é de responder a pergunta seguinte: quais são as estratégias que as instituições adotam para reduzir sua dependência com relação a seus principais stakeholders financeiros? Finalmente algumas implicações práticas de gestão serão elaboradas a partir do paralelo entre as estratégias das duas instituições.

The development of the private equity industry since the 2008 financial crisis

The private equity industry was experiencing a phenomenal boom at the turn of the century but collapsed abruptly in 2008 with the onset of the financial crisis. Considered one of the worst crises since the Great Depression of the 1930s, it had sent ripples around the world threatening the collapse of financial institutions and provoking a liquidity crunch followed by a huge downturn in economic activity and recession. Furthermore, the physiognomy of the financial landscape had considerably altered with banks retracting from the lending space, accompanied by a hardening of financial regulation that sought to better contain systemic risk. Given the new set of changes and challenges that had arisen from this period of financial turmoil, private equity found itself having to question current practices and methods of operation in order to adjust to the harsh realities of a new post-apocalyptic world. Consequently, this paper goes on to explore how the private equity business, management and operation model has evolved since the credit crunch with a specific focus on mature markets such as the United States and Europe. More specifically, this paper will aim to gather insights on the development of the industry since the crisis in Western Europe through a case study approach using as a base interviews with professionals working in the industry and those external to the sector but who have/have had considerable interaction with PE players from 2007 to the present.

Exchange rate management techniques

This briefing note addresses the question: What revisions of financial regulation and financial governance in Brazil are necessary to support Brazilian development? What’s in place and what’s missing? The focus here is a dimension of financial regulation and governance: the regulation of capital flows and of exchange rate operations. The arguments are organized in the following manner. In the next section, we summarize the impacts of th crisis on the emerging-market economies and on the regulation of the international monetary and financial system. The third section discusses the post-crisis dilemmas faced by these economies. Finally, the fourth section presents some policy recommendations for Brazil.

Applying supply chain management models in the banking industry: a brazilian case analysis

The study presents the results and recommendations deriving from the application of two supply chain management analysis models as proposed by the Supply Chain Council (SCOR, version 10.0) and by Lambert (1997, Framework for Supply Chain Management) on the logistics of cash transfers in Brazil. Cash transfers consist of the transportation of notes to and from each node of the complex network formed by the bank branches, ATMs, armored transportation providers, the government custodian, Brazilian Central Bank and financial institutions. Although the logistic to sustain these operations is so wide-ranged (country-size), complex and subject to a lot of financial regulations and security procedures, it has been detected that it was probably not fully integrated. Through the use of a primary and a secondary data research and analysis, using the above mentioned models, the study ends up with propositions to strongly improve the operations efficiency

Best practices for the implantation of ISO 14001 norms: a study of change management in two industrial companies in the Midwest region of the state of São Paulo - Brazil

Among the difficulties found in the implementation of ISO 14001 systems, resistance to change can always be found. It is mainly a consequence of the hurry to change, loss of focus, concentration of decision making at the level of top management, arbitrary imposition of objectives and results, faulty communication, and the absence of motivational and financial incentive for change.Therefore, the main objective of this paper is to present best practices with respect to the management of organizational change due to the implementation of ISO 14001 norms in two industrial companies in the Midwest region of the State of São Paulo - Brazil. (C) 2008 Elsevier Ltd. All rights reserved.

Social and financial aspects of the artisanal fisheries of Middle Sao Francisco River, Minas Gerais, Brazil

The presence or absence of motorized boats, partnerships and multispecies catches characterize the fisheries of Sao Francisco River, Minas Gerais, Brazil. Fishing activity based on 109 interviews, carried out in the wet (high water: February and March) and dry (low water: July and August) seasons, with professional fishermen are described. Aiming to identify the fishery income components, a covariance model was proposed, with the income as the response variable, related to the factors: fishing ground, use of motorized or paddle boat; seasonality; presence of fishing assistant, and the following covariates: capture in weight in the week Frier to the interview, fisherman experience in yrs; and distance (km) travelled for fishing. The results indicated that the main contributions to income were the absence of an engine (because of high price of the fuel), the absence of a partner (because of low capture) and the amount of fish caught by the fishermen.

Financial crises in "successful" emerging economies

Includes bibliography

Three varieties of capital surge management in Chile

Includes bibliography