Obtain the most recent financial statements of a Fortune 500 financial institution of your choice. Carefully study the audited financial statements, including the Management Discussion and Analysis (MD&A) section, with emphasis on the lending and investment practices of the company. In addition, visit relevant company websites and obtain Moody’s and S&P 500 information as supplementals.
Provide an analysis of the risk management processes the institution uses, focusing primarily on:
Market risk.
Business/operational risk (including interest rate risk and exchange rate risk).
Financial risk.
Liquidity risk .
In your analysis, where necessary, create simulations from financial data obtained and cover the following:
Identify your company’s business and regulatory environment.
Discuss the traditional approaches used in the management of each category of risk listed above.
Explain the applicability, usefulness, and limitations of methodologies and models covered in the course (mainly VaR, RAROC, Black-Scholes, Altman’s Z-score, Vasicek’s and Merton’s models), and determine if any is used by your company.
Identify any risk management mistakes the company may be making or may have made in the past.
Provide recommendations and suggestions for areas in need of improvement.
