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by 趙永祥 2017-11-10 08:29:32, 回應(0), 人氣(1)


UK Business and Economy News Opinions Analysis

(Announced : 15-October-2017)


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UK Business and Economy News Opinions Analysis

3rd November 2017 – More Signs That Most UK Economists Are Wrong About British Economy Again

Britain’s services sector grew by the fastest rate in six months.

IHS Markit/CIPS purchasing managers’ index (PMI) jumped to 55.6 in October from 53.6 in September, its highest level since April and its biggest one-month rise since August 2016.

2nd November 2017 – UK Interest Rates Rise For First Time In 10 Years

The Bank of England BoE increased UK bank base by 0.25% to 0.50%.   The Governor of the BoE says that this is a good news story for the UK.   It indicates that the economy is growing.   Businesses are investing more.

Consumer debt is not out of control, but inflation needs controlling with a rate rise now and more rate rises in near future.

Borrowing is set to increase.   Hopefully UK savers will benefit from higher rates.

1st November 2017 – UK Manufacturing Sector Outperforms The Economic Experts Once Again

The UK pound has jumped to a new intraday high against the USdollar after it was revealed that the UK manufacturing sector is buzzing.

UK manufacturing posted stronger than expected sector performance in October, according to latest IHS Markit’s PMI survey.

Britain’s manufacturers are increasingly confident that the global economy, including the often derided UK economy, is recovering.   Recruitment in UK manufacturing factories is up and set to increase at its fastest rate in years so UK manufacturing output is going to increase too.

UK growth accelerated in the manufacturing sector in October, with new orders increased and UK exports grew.   The UK manufacturing sector may even hit annualised growth of 4% if the present rate of expansion continues over the next 12 months.   The number of UK manufacturers expecting new orders to fall is in single digits.

Will UK interest rates will rise this week?   Yes.

9th October 2017 – UK Wage Costs Rising Faster Than Thought

The Office for National Statistics ONS miscalculated a measure which suggest UK wages are rising faster than first indicated.   This means that it is more likely that UK interest rates will rise in November 2017.

The ONS issued a correction after it messed up the calculation of a crucial measure the Bank Of England BoE uses to decide on interest rate adjustments in UK.   The ONS used the wrong set of data to calculate UK labour cost, the cost of employment per worker.

UK labour cost rose 2.4% in second quarter of 2017 not the 1.6% the ONS previously said it rose.   Now that the BoE knows UK labour unit costs are rising faster than thought there is more pressure to raise interest rate in UK to mitigate the threat to rising inflation.

On the plus side this shows that wages are rising faster which is a sign that the UK economy will strengthen further.

29th September 2017 – Mark Carney, governor of Bank of England BoE, indicates a UK interest rate rise in November 2017

Mark Carney said on BBC’s Today programme today that UK interest rates “on track” to rise in November 2017.

“What we have said, that if the economy continues on the track that it’s been on, and all indications are that it is, in the relatively near term we can expect that interest rates would increase”

Most financial economists and commentators are now factoring in a UK interest rate rise in November.

21st September 2017 – Public Sector Spending Deficit Lowest August Deficit In 10 Years

Domestic and foreign shoppers increased UK government VAT receipts, reducing the amount needed to be borrowed in August.   As a result, the Chancellor might be able to give some money away in the upcoming budget in November including increasing public sector pay faster.

If people have more money to spend, this could boost future government receipts and boost corporate earnings.

20th September 2017 – Majority Of Economists Expect UK Interest Rate Rise In November 2017

The majority of economists polled by Reuters expect the Bank of England BoE to increase UK interest rates in November.

According to the economists polled an interest rate hike in November is now a certainty, yet fairly recently very few were predicting an interest rate rise in 2017.

18th September 2017 – UK Is Growing Faster Than First Thought

The Centre for Economics and Business Research (CEBR) is predicting the economy to grow by 1.5% in 2017, where it previously forecast just 1.3% UK growth.

The CEBR has revised UK growth upwards due to the improved performance of UK manufacturing and increased consumer confidence in UK economy.

16th September – Higher Inflation and Pick Up In UK Growth and Global Growth Could Mean Interest Rate Rise Sooner Than Later

Bank of England representatives on MPC have recently hinted that the UK needs higher interest rates, potentially before the end of 2017.   As a result the value of the pound has risen in the expectation that rates will soon be on the up and not 2019 as previously many economists thought.

Fears that Brexit vote will cause a collapse of the UK economy have failed to materialise.   In fact house prices continue to rise in most parts of the UK, unemployment is a record low’s, wages are starting to rise faster, manufacturing in UK has experienced a renaissance and things are generally very healthy as indicated by rising inflation.

31st August 2017 – UK Should Increase Interest Rates

According to a member of the Monetary Policy Committee MPC, Michael Saunders, the UK needs to increase its interest rate now to help keep inflation under control in the next few months.

In addition, it will start to educate and familiarise people with more noraml interest rate levels and start to adjust their attitude to borrowing and expenditure.   This may help head off a debt bubble bursting in the UK.

27th August 2017 – UK Consumers Are More Confident In UK Economy

British consumer morale improved in August according to poll from YouGov.

Strong trade, particularly UK exports, and business investment should counterbalance any reduction in UK consumer spending, according to the Bank of England, but any uptick in UK consumer confidence will be a welcome bonus to the UK economy.

6th August 2017 – Credit Boom Threatening UK Resilience

The majority of actual real economic figures suggest that interest rates should have risen by now, however the Bank of England BoE continues to resist interest rate increases in the UK.

UK consumers are borrowing more.   Much of this extra borrowing is being spent on consumer goods like new cars.   The UK consumer is very used to cheap money and there is a belief that interest rates will never increase.   This belief is being fed by the BoE who don’t raise interest rates.

In addition, there is no reason to save money in the UK.   Interest rates are so low the return doesn’t even cover inflation.   If interest rates were increased inflation would reduce and savers would have more of an incentive to save for the future.

5th August 2017 – UK Economy To Boom In Second Half Of 2017

Britain’s economy is about to prove to people it is far healthy than the figures for the first half of 2017.

The National Institute Of Economic and Social Research (NIESR) is a think tank that believes that the UK economy is about to perform very strongly.   Overall growth for 2017 will be 1.7% but this is only because of the relatively slow growth of the first half of 2017.   UK economic growth will be driven by UK exporters, who will continue to outperform even recent good business development.

4th August 2017 – Former Bank Of England Deputy Governor Says The UK Should Be Raising Interest Rate Now

Sir John Gieve says there is a “strong case” for raising UK interest rates because the economic disaster predicted by Remainers if the UK voted to leave the European Union EU has not happened.

The Bank of England this week held UK interest rate at 0.25%.   Sir John Gieve looks at low unemployment will start to push up UK wages and inflation is already high compared to recent years and way above the Bank of England’s own target of 2%.   If now is not the right time to raise UK interest rate then when is?

The website linkage 

https://businessrisktv.com/exhibitions/uk-business-exhibition-online/


by 趙永祥 2017-11-08 07:03:56, 回應(0), 人氣(1)


Business Risk Management

- Global Business Collaboration


https://businessrisktv.com/exhibitions/uk-business-exhibition-online/


LATEST BUSINESS ECONOMY NEWS

by 趙永祥 2017-08-22 10:43:22, 回應(0), 人氣(44)


How to implement Firm-wide Risk Management



Firm-wide risk management entails a significant commitment of time and resources. It requires a focus on the central businesses of a firm, bottom-to-top review of lending or origination, trading or market making, and intermediation with a risk management perspective. It leads to the construction of databases and reporting systems quite different from standard accounting systems. In this process, there are some guiding principals for successful implementation:

First, risk management must be integral to an institution’s business plan. Decisions to enter, leave, or concentrate on an existing business activity require careful assessment of both risks and potential returns. A firm must define risk management practices for each business activity it pursues. It must eliminate those activities not part of its focus so that it does not assume avoidable risks because of a lack of management oversight.


Second, a firm must define the specific risks of each activity and develop ways to measure them. Similarly, it must develop databases to measure risk consistently across the entire organization.Credit risk evaluation techniques, for example, should be the same in corporate lending as in correspondent banking. Only then will aggregate credit quality reports have meaning for senior management.


Third, a firm must establish procedures so that risk management begins at the point nearest to the assumption of risk. This means it must adapt trade-entry procedures, customer documentation, client engagement methods, trading limits, maximum loan sizes, hedging strategies, and a myriad of other normal activities to maintain management control, generate consistent data, and eliminate needless exposure to risk.


Fourth, a firm must develop databases and measurement systems in accordance with how it conducts business. For example, most accounting systems for trading operations record trades on the basis of settlement day. However, to measure trading-desk risks, risk management systems must record positions on a trade-date basis, which means that the risk management system must access the trade-entry system directly. Moreover, for accurate daily reports, trades must be recorded, entered, and checked frequently. Next-day corrections of bad trade information are not timely enough.


Finally, none of these procedures or databases are effective or meaningful until the firm establishes an overall risk management system that senior managers use.23 It must use the system to evaluate businesses, individual performance, and its value added. The system must be the ongoing focus of management analysis and discussion and, over time, become part of board meeting presentations. To achieve this, the business units being monitored must check risk reports regularly and tailor reports for their users. The system must be part of management’s oversight, control, and compensation.


Written by Dr. Chao Yuang Shiang
Faculty, Dep. of Finance, Nan Hua university


趙永祥 博士
(南華大學財務金融學系暨財務管理研究所 專任助理教授)


22-August-2017
by 趙永祥 2017-08-21 20:58:20, 回應(0), 人氣(29)

Five Ways to Make Risk Managements Well


Financial investing is a common way businesses and individuals generate passive income streams. Investing money can be done through a wide variety of investment instruments. Stocks, bonds, derivatives, mutual funds, money markets and other items are just a few types of available investments. All investments involve some type of risk, albeit certain investments are less risky than others. Properly managing risk can ensure businesses and individuals generate income and do not lose their capital on unwise choices.


1. Diversify

The standard investing guideline for risk management is diversification, which requires businesses and individuals to invest in a wide variety of investments. A common diversification method is to split money in a specific way, such as 25 percent in low-risk money markets, 25 percent in government bonds, 30 percent in domestic stocks or derivatives and 20 percent in international investment instruments. Diversification attempts to spread risk among several safe and risky investments in various economic markets.


2. Use Savings Account

Businesses and individuals should hold a portion of their capital back when making investments. Using a savings account ensures these individuals have cash on hand for emergency purposes if necessary. Savings accounts may also represent an extremely safe investment if the bank or credit union offers interest on the savings account balance. Businesses and individuals can also use a savings account to electronically transfer funds when buying or selling investments, creating quicker transaction times.


3. Invest Sooner Than Later

Investing sooner rather than later allows businesses and individuals to let their money work longer and potentially earn higher returns. If investment markets become extremely risky and businesses or individuals start losing money, investment decreases will only reduce earned income rather than the original principal balance. This allows individuals to cash out of extremely risky investments with little economic loss relating to their original investment.


4. Learn About Investments

Managing financial risk often requires businesses and individuals to spend copious amounts of time learning and understanding about the investment market. A portion of this time should also be spent on learning about specific investment instruments offered by companies and governments. Investment education may come from brokerage houses, investment websites, books or other similar materials. Proper investment education can mean the difference between highly successful returns and significant losses.


5. Be Savvy, Not Greedy

Financial investing often requires businesses and individuals to be savvy, not greedy. Savvy investors often understand when to cash out and accept current financial returns. Greedy investors will continually wait for the investment to go higher and provide better financial returns. The problem with waiting for investments to go higher is the investments might begin to go down. Significant reductions in investments can occur quickly and erase all financial returns earned on investment instruments.



Written by Dr. Chao Yuang Shiang (趙永祥 博士)

Faculty, Dep. of Finance, Nan Hua university

(南華大學財務金融學系暨財務管理研究所 專任助理教授)

21- August- 2017   
by 趙永祥 2017-08-21 07:06:06, 回應(0), 人氣(29)


When to Practice Risk Management

The contrast between the REMIC and the commercial bank is stark. The debt and equity claims that both the REMIC and the commercial bank issue are risky in almost any sense. Yet, in the case of the REMIC, investors buy the instruments and seldom hold the intermediary accountable for their performance. The trustee monitors the service and foreclosure firm for a fee but is not held liable for market performance. Theoretically, the REMIC is the ultimate passive intermediary. Conversely, active management is critical to the commercial bank’s activity. The bank originates and manages illiquid assets whose values in the open market are imprecise and over time. Unlike the REMIC, the bank has no predetermined life span or constraints on asset replacement.

Differences between Institutions

The difference between a REMIC and a bank is the transparency or permanency of each organization’s investor interests. An investor in a REMIC can obtain a very detailed description of its assets, contracts, and payment schemes for regular interests. The rules for operation are quite clear. Thus the many unexpected events that severely affect the REMIC’s value do not lead to questions of confidence or competence on the part of the trust.


In a typical, actively managed financial firm, however, such information is only available to managers because of the uncertainty concerning the economic value of financial claims. Either because of product tieins, as in insurance products, or because of ambiguity in underlying asset value, pricing these assets and therefore shareholder value is problematic for the intermediary. In addition, the extent of dynamic asset change and the rules followed for such portfolio adjustment are rarely communicated or subject to monitoring, due to the features of the assets held.


We can generalize from the distinctions between these two institutional types by imagining principal financial institutions arrayed in a two-dimensional space in which one axis measures how transparent its actions are to investors and the other axis measures how actively its investments are managed . For simplicity, institutions are either transparent, translucent, or opaque in information and either active or passive in operation. Discretionary risk management activity is concentrated in the actively managed, opaque institutions, clustered in the top right corner. On the other hand, transparent institutions with rather passive investment strategies are in the lower left. In these institutions, rules substitute for management.


There are also institutions at the other extremes. In the upper left are the actively managed institutions such as open-end mutual funds, which are fully transparent but actively managed in a manner clearly defined by their prospectus. These institutions limit risk management to eliminating unnecessary risk. They shed nonessential risk at the same time that they seek those risks essential to the value-added activity. At the other extreme are agency mortgage pools, which flourish only with implicit government guarantees. The opaqueness of these portfolios makes the institutions’ asset value uncertain, and only through credit enhancements can the investor be convinced of the timeliness of future cash flows.


Institutions can also flourish inside this two-dimensional space, labeled translucent, because some information is available, but it is often not timely or wholly credible. At institutions in the vertical, intermediate range, a substantial amount of energy is spent communicating with stakeholders and presenting clear statements of investments or investment policy. These actions are attempts to clarify the institutions’ positions and perhaps move them into the transparent area.


Fees associated with intermediation services tend to correlate with the extent of active management. For example, index funds generally carry lower management fees than either actively managed investment funds or depository institutions. In part, this is because the latter have higher operating costs associated with more portfolio transactions and a higher turnover rate. However, this is also due to the presumed greater value added that the managers provide. They have discretion because of their expertise in the chosen market and their associated reputation for above-average performance and skill in active risk management. In essence, one value-added activity that managers perform is to control risk at the firm level in order to increase portfolio value to stakeholders.



Written by Dr. Chao Yuang Shiang (趙永祥 博士)

Faculty, Dep. of Finance, Nan Hua university

(南華大學財務金融學系暨財務管理研究所 專任助理教授)

20- August- 2017   
by 趙永祥 2017-08-21 06:36:26, 回應(0), 人氣(28)


Why Does Risk Management Matter?

According to standard economic theory, firm managers should maximize expected profits 

without regard to the variability of reported earnings. However, literature on the reasons 

for managers’ concern about the volatility of financial performance dates back to 1984, 

when Stulz offered a viable economic reason for firm managers’ concern. 

Since then, there have been alternative theories and explanations; a recent review of the literature 

presented four reasons to justify active risk management:

  1. Managerial self-interest
  2. Tax effects
  3. Cost of financial distress
  4. Capital market imperfections

In each explanation, the volatility of profit leads to lower value to at least some of the firm’s 

stakeholders. In the first, it is noted that managers have limited ability to diversify their 

investment in their own firm, due to limited wealth and the concentration of human capital 

returns in the firm they manage. This fosters risk aversion and a preference for stability. 

In the second, it is noted that, with progressive tax schedules, the expected tax burden is 

lessened by reduced volatility in reported taxable income. The third and fourth explanations 

focus on the fact that a decline in profitability has a more than proportional impact on the 

firm’s fortunes. Financial distress is costly, and the cost of external financing increases rapidly 

when a firm’s viability is in question. Any one of these reasons is sufficient to motivate 

managers to be concerned about risk and carefully assess both the level of risk associated 

with any financial product and potential risk-mitigation techniques.

How Can a Firm Mitigate Risk?

Managers can consider three generic risk-mitigation strategies

  1. Eliminate or avoid risks by simple business practices.
  2. Transfer risks to other participants.
  3. Actively manage risks at the firm level.

Risk avoidance involves reducing the chances of idiosyncratic losses by eliminating risks 

that are superfluous to the institution’s business purpose. Common risk-avoidance activities 

are underwriting standards, hedges or asset-liability matches, diversification, reinsurance or 

syndication, and due diligence investigation. The goal is to rid the firm of risks that are unessential 

to the financial service provided or to absorb only an optimal quantity of a particular risk.

What remains is some portion of systematic risk and the risks that are unique to an institution’s 

business franchise. In both, risk mitigation is incomplete and can be enhanced. Any systematic risk 

not required to do business can be minimized. Whether this is done is a business decision that the 

firm can clearly indicate to stockholders. Likewise, in operational risk, the firm can address the risks 

of providing service — including fraud, oversight failure, lack of control, and managerial limitations. 

Aggressive risk-avoidance activities in both these areas will constrain risk, while reducing the 

profitability from the business activity. Accordingly, the firm can communicate the level of 

effort it makes to reduce these risks to shareholders and justify the costs.

The firm can eliminate some risks or at least substantially reduce them by transferring them. 

Markets exist for the claims that many of these financial institutions issue and/or the assets 

they create. 

Individual market participants can buy or sell financial claims to diversify or concentrate the risk in 

their portfolios. To the extent that the market understands the financial risks of the assets that the firm 

creates or holds, the assets can be sold in the open market at their fair market value. If the institution has no comparative advantage in managing attendant risks, it has no reason to absorb or manage such risks rather than transfer them. In essence, for the firm, there is no value added associated with absorbing the risks.

However, the firm should absorb another class of assets or activities in which the risk is inherent. 

In these cases, risk management must be aggressive, and there must be good reason for using further resources 

to manage firm-level risk. These financial assets or activities have one or more of these characteristics:

  1. 1. The equity claimants, or others for whom the institution has a fiduciary interest, may own claims 
  2. that the investors cannot trade or hedge easily themselves. For example, defined-benefit pension plan participants can neither trade their claims nor hedge them on an equivalent after-tax basis. 
  3. This also applies to the policies of mutual insurance companies, which are complex bundles of insurance 
  4. and equity.
  5. The nature of the embedded risk may be complex and difficult to reveal to nonfirm-level 
  6. interests, such as banks, which hold complex, illiquid, and proprietary assets. 
  7. Communication in such cases may be more difficult or expensive than hedging the underlying risk. 
  8. Moreover, revealing information about customers or clients may give competitors an undue advantage.
  9. If moral hazard exists, it may be in the stakeholders’ interest to require risk management as part of 
  10. standard operating procedures. For example, providers of insurance, e.g., the FDIC, can insist that 
  11. institutions with insured claims follow appropriate business policies.

Written by Dr. Chao Yuang Shiang (趙永祥 博士)

Faculty, Dep. of Finance, Nan Hua university

(南華大學財務金融學系暨財務管理研究所 專任助理教授)

21- August- 2017   
by 趙永祥 2017-08-18 08:40:26, 回應(0), 人氣(25)


The evolution of insurer portfolio investment strategies for long-term investing


by Helmut Gründl, Ming (Ivy) Dong, Jens Gal*


The recent global financial crisis, combined with regulatory changes in financial industries, has altered the financial landscape in terms of how financing can be achieved and the potential role of institutional investors. The potential role that insurers, particularly life insurers and pension funds, can play as long-term institutional investors has become a central topic of discussion in various fora. How this role develops will, in the long run, affect how firms obtain financing for their investments and ultimately lead to growth of the real economy. This article provides an overview of the evolving investment strategies of insurers and identifies the opportunities and constraints they may face with respect to long-term investment activity. 

The report investigates the extent to which changes in macroeconomic conditions, market developments and insurance regulation may affect the role of insurers in long-term investment financing. It concludes that regulation should neither unduly favour nor hinder long-term investment as such, but place priority on incentivising prudent assetand-liability management with mechanisms that allow for a “true and fair view” of insurers’ risk exposures. In risk-based solvency regulation, an asset’s risk relative to liabilities is reflected in the capital requirements. 


JEL classification: G22, E22, F21, O16, 

Keywords: insurance, long-term investment, asset-liability management, 
                 risk-based capital
by 趙永祥 2017-04-01 12:31:29, 回應(0), 人氣(32)

Business relationship responsibilities 

in the context of institutional investors


The OECD has previously concluded in a paper on the scope and application of business relationships in the financial sector that a relationship between an investor and investee company including a minority shareholding can be considered a "business relationship " under the OECD Guidelines.


Hence investors, even those with minority
shareholdings, may be directly linked to adverse impacts caused or contributed to by investee companies as a result of their ownership in, or management of, shares in the company causing or contributing to certain social or environmental impacts. In other words, the existence of RBC risks (potential impacts) or actual RBC impacts in an investor’s own portfolio means, in the vast majority of cases there is a “direct linkage” to its operations, products or services through this “business
relationship” with the investee company.

As a result, investors are expected to consider RBC risks throughout their investment process and to use their so-called “leverage” with companies they invest in to influence those investee companies to prevent or mitigate adverse impacts. However, investors are not responsible for addressing those adverse impacts themselves.


In some limited circumstances, adverse impacts caused by companies associated with an investment will not be directly linked to an investor’s own operations, products or services (e.g. their own portfolio). For example, in circumstances where an investor buys shares or other equity in a joint venture (JV) company,
it will have an investor-investee business relationship with that JV company. 


However, if one of the JV partners is causing/contributing to adverse impacts (e.g. forced labour) through a separate, unrelated project (i.e. which the investor has no investment, ownership or other connection with), the investor is not directly linked to the forced labour impacts through its investment in the JV. However since there may be a risk of similar behaviour in the projects operated by the JV company, if the investor becomes aware of this situation, it should trigger ‘heightened ongoing due diligence’ on the JV.
by 趙永祥 2017-02-28 20:54:31, 回應(0), 人氣(98)


FRM course

- Figures and Tables on Impact of risk and action strategy 

(Date: 2017-03-01)
by 趙永祥 2017-02-28 20:36:25, 回應(0), 人氣(72)


FRM textbook enhanced 05
-Risk Assessment in Practice
by 趙永祥 2017-02-28 20:30:32, 回應(0), 人氣(81)

ENTERPRISE RISK MANAGEMENT

- A framework for success

The implementation and maturity of ERM programs in healthcare organizations—while making significant strides—still lag behind large organizations, public companies, and financial services organizations. Although many healthcare risk-management professionals implement ERM strategies for new programs, projects and services (particularly to manage clinical, and patient-safety related risks), they fail to advance ERM strategies on an organization-wide basis beyond those risks and thus miss tremendous opportunity to increase or create value. Recognizing the elements necessary for ERM program development and implementation and embedding them in the enterprise is central to program success and sustainability. 
by 趙永祥 2017-02-28 20:23:05, 回應(0), 人氣(70)

FRM textbook enhancement 03:Risk management overview

Risk in itself is not bad; risk is essential to progress, and failure is often a key part of learning. But we must learn to balance the possible negative consequences of risk against the potential benefits of its associated opportunity. (Van Scoy, 1992) 

A risk is a potential future harm that may arise from some present action (Wikipedia, 2004), such as, a schedule slip or a cost overrun. The loss is often considered in terms of direct financial loss, but also can be a loss in terms of credibility, future business, and loss of property or life. This chapter is about doing proactive planning for your software projects via risk management. 

Risk management is a series of steps whose objectives are to identify, address, and eliminate software risk items before they become either threats to successful software operation or a major source of expensive rework. 

The Risk Management Practice The risk management process can be broken down into two interrelated phases, risk assessment and risk control, as outlined in Figure 1. These phases are further broken down. Risk assessment involves risk identification, risk analysis, and risk prioritization. 

Risk control involves risk planning, risk mitigation, and risk monitoring.(Boehm, 1989) Each of these will be discussed in this section. It is essential that risk management be done iteratively, throughout the project, as a part of the team’s project management routine. 

Risk Identification In the risk identification step, the team systematically enumerates as many project risks as possible to make them explicit before they become problems. There are several ways to look at the kinds of software project risks, as shown in Table 1. It is helpful to understand the different types of risk so that a team can explore the possibilities of each of them. Each of these types of risk is described below. 




Figure 1: The Risk Management Cycle.  
by 趙永祥 2017-02-28 15:34:28, 回應(0), 人氣(44)

Supplement to FRM course (FRM Supplement 003) 

- Professor Chao
by 趙永祥 2017-02-28 15:33:47, 回應(0), 人氣(93)


Supplement to FRM course (FRM Supplement 002) 

- Professor Chao
by 趙永祥 2017-02-26 00:03:13, 回應(0), 人氣(87)

Financial Risk Management (FRM file 05) 

Impact of risk and action strategy
by 趙永祥 2017-02-23 11:37:37, 回應(0), 人氣(105)

Financial Risk Management (FRM file 04) 

Base concepts- Nature of Financial Risk
by 趙永祥 2017-02-23 11:00:16, 回應(0), 人氣(103)


Financial Risk Management (FRM file 03) 

Ethics in financial market

- The main points and concepts
by 趙永祥 2017-02-22 18:41:28, 回應(0), 人氣(96)

Financial Risk Management (FRM File01) 
- Application in the Financial Markets

by 趙永祥 2016-12-04 19:39:05, 回應(0), 人氣(173)



    China Economic Development and Investment Risks



China Economic Development and Investment Risks

CHINA Economic growth is being supported by stimulus, but is set to edge down further to 6.1% by 2018. At the same time, risks are rising. The economy is undergoing transitions on several fronts. Private investment will be reinvigorated by the removal of entry restrictions in some service industries, but held back by adjustment in several heavy industries. Housing prices are again rising fast in the bigger cities, but working off housing inventories in smaller cities will take time. Consumption growth is set to hold up, especially as incomes rise and urbanisation continues. Reductions in excess capacity will ease downward pressure on producer prices but consumer price inflation will remain low. Import demand for goods will be damped by on-shoring, while services imports, in particular tourism, will grow rapidly. Exports will be held back by weak global demand and loss of competitiveness. Fiscal policy, including via the policy banks, is very expansionary. Monetary policy prudence is called for so as not to aggravate imbalances. Removing implicit public guarantees and ending bailouts would make for better and more market-based pricing of risk. Corporate debt has risen substantially to high levels and the enterprise sector therefore needs to deleverage. Supply-side reforms to cut excess capacity need to accelerate and bankruptcy of zombie firms be made easier. Leveraged investment in asset markets should be contained and monitored. Public investment should focus on efficiency and avoid crowding out the private sector. New revenue sources, such as property taxation or a more progressive personal income tax, can be used to meet increasing spending needs for public services and social security. Fiscal relations across government levels should be revamped so that local mandates are adequately funded.

Risks are mounting apparently nowadays

Policy stimulus will help keep growth above 6% over 2016-18. However, investment is increasingly financed by public funds. Opening up additional sectors to private investment will provide new opportunities for private capital. Current growth rates of disposable income will support consumption growth, but without structural reforms to reduce precautionary savings such as the provision of a better social safety net and higher-quality public services, rebalancing will advance only slowly. The slow pace of reform of state-owned enterprises and high leverage will continue to take up resources, preventing reallocation for more efficient use. Soaring property prices in first-tier cities and leveraged investment in asset markets magnify the risk of disorderly defaults.

Excessive leverage and mounting debt in the corporate sector compound financial stability problems. Rapid adjustment in the real estate and industrial sectors would drag down growth temporarily, but is necessary to strengthen resilience. Supply-side policies, including deleveraging and working off excess capacity, are crucial to avoid a sharp slowdown down the road. Greater-than-expected stimulus, in contrast, would result in stronger growth in the short term but larger imbalances later. On the upside, a stronger-than-foreseen global rebound would support Chinese exports and growth.

Dr. Chao Yuang Shiang
4-December-2016
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