Financial management is a critical component of the broader subject of risk management. Inadequate financial management makes an organization vulnerable to a number of risk exposures.
Organizations in the finance sector have a greater impact on the aggregate economy than organizations in other sectors. The consensus among scholars and academics alike is that the private banking industry was insufficiently regulated prior to the most recent financial crisis. This lead to inappropriately relaxed risk management environments within banks, which lead to the near collapse of the global economy.
For this assignment, you will write a minimum three-page paper (not including APA title or references pages). In this paper, please address the following questions:
- What are the specific ways banks impact the economy?
- How was the regulatory environment revised?
- Is the regulation effective?
- What risk management standards had to be employed as a result of legislation?
- What are the consequences of failure to meet the standards outlined by regulators?
- Would a firm be prudent to properly manage their level of leverage and liquidity if it were not regulated? Why or why not? What tools can organizations employ to manage these risks?