Demonstrate your understanding of classical and modern, domestic and global operations of money and capital markets by:
Explaining how the Global Financial Crisis [GFC] has had a significant impact on
The stability and interconnectedness of international financial markets and economies
The regulatory responses that have been implemented in an attempt to stabilize the financial system.
While Commercial Banking was not the only sector to be affected by the GFC, apparently business continuity was threatened, and many were exposed to the very real risk of failure. Business continuity risk management may be said to incorporate a disaster recovery planning process and a disaster recovery response process.
Define business continuity risk management.
Identify and briefly explain the core components of a disaster recovery planning process.
Identify and briefly explain the core components of a disaster recovery response process.
While Commercial Banking was not the only sector to be affected by the GFC, clearly business continuity was threatened, and many were exposed to the very real risk of failure. Business continuity risk management may be said to incorporate a disaster recovery planning process and a disaster recovery response process.
Define business continuity risk management.
Identify and briefly explain the core components of a disaster recovery planning process.
Identify and briefly explain the core components of a disaster recovery response process.
INTRODUCTION
Global financial crisis implies the capacity of the loan specialists to pay back the cash to the managing an account organization in this manner negatively affected the security of the universal money related market. This is so because, after the money related emergency, the legislature of applicable Nations forces strict control and watchfulness over the managing an account exercises of the banks under their carefulness. Access to outside assets was diminished to a more prominent degree (Rose and Terrones, 2008).
To analysis the impact of the Global Financial Crisis, first of all, we are required to understand the causes of Global Financial Crisis. The following are the causes of the financial crisis
With the reduction in the value of money the commodity price rises the value of real estate particularly;
Now due to this overpricing, the borrowers were unable to pay its debt.
This has resulted in bankruptcy of banking sector itself;
All these factors have led to the financial crisis at the global level.
The Impact of Global Financial Crisis:
Reduction in investment activities;
Unfavorable affected on the development and supportability of the economy;
The financial crisis brought about a diminishment in GDP and national pay of the organization as managing an account Foundation is a critical piece of the economy of the nation and along these lines with the ruin of the saving money establishment; the economy of the country is general affected.
Impact on international financial stock markets and economies
Strong documentation and requirement to be fulfilled before appraising any loan proposal;
With the increase in NPA i.e. loss assets, the accessibility of small and medium enterprise to bank loan reduces;
High-interest rates for riskier borrowers;
From the above discussion, we can say that global financial crisis had a negative impact on the access to foreign funds was reduced to a greater extent (Crotty, 2009).
2) Regulatory responses to Global Financial Crisis
The banking industry is the most important part of the economy of any country. Without which an entity cannot carry out its activities. Almost every organization is highly dependent on the banking activities on a daily basis for financial assistance. With Global Financial Crisis, the banking companies refuse to give the loan to small and medium enterprise thus this will reduce the industrial development of the country and thus had an adverse impact on the GDP of the organization. To mitigate this problem, the government of the country along with the central bank of the country had devised certain rules and regulations by which they will control the banking activities so as to reduce non-payment of debt. Before providing any loan, the client would be scrutinized thoroughly so as to reduce the risk of non-payment (Belka, 2009).
Expansion of international trade, globalization, and IT advancement is the main concern globally. This aspect has changed the way the business activities is carried out. With this advancement, the economy has benefitted much, but there are disadvantages as well. All the advancement has increased the frequency and probability of fraud. The business environment has become much dynamic and complex. To survive in such dynamic environment, every entity has to carry out its activities in a thoughtful manner, taking into consideration the pros and cons of such dynamism. To ensure continue its activities and survive such dynamism, every organization is required to have a business continuity planning in place, or disaster recovery plan should be in place (Manesceld, 2009).
Managing risk in business continuity now becomes a necessity for every entity to survive the dynamic business environment. Every company is formed with the objective of earning the profit and continue its activities over an indefinite period. But apart from making the profit, it has now become difficult to survive in this dynamic business environment. With the advancement in technology and international trade, the competition has grown much, and thus it has become difficult to survive such environment. Moreover, natural or man-made disaster has a continuous threat to the continuity of the company. For this, there is a requirement of business continuity plan or disaster recuperation plan in force. This plan will help the organization to mitigate or mange the risk to a certain level (Miskin, 2010).
- b) Disasterrecuperation plan is nothing but business continuity plan which ensures that the business keeps going when the disaster occurs.The disaster recuperation plan should be prepared with utmost care and diligently so that the same can be used as intended when the disaster occurs. The core features of disaster recuperation plans differ with a different organization. But the general core features of disasterrecuperationplan are – it should contain the name, contacts and the responsibility of concerned person when such disaster occurs, secondly what the core activities of the organisation, on which the company’s continuity is dependent is required to be identified so that the same could be continued in alternate resources, thirdly the immediate action which needed to be taken when disaster happens and lastly the details of the alternate resources (Staehr, 2010).
- c) The core features of disaster recovery response it just the outcome of the plan itself. We can say that when a disaster occurs the responsible person should take action as stated in the disaster recuperation plan to ensure the continuity of the chief activities of the organization.
CONCLUSION
Worldwide budgetary emergency turns out to be the fiasco to the money related strength of the economy on the loose. GFC has affected the fundamental solidness of the organizations around the world. Hence with the progression of time, it is prudent that there ought to be BCP set up (Lakstutiene, 2008).
Bottom-up analysis approach focuses on the analysis of accounting ratios and other performance measures. Discuss this approach from two perspectives.
Evans and Partners is an investment advisory firm that provides specialist investment advice to its private clients. As part of the investment decision process, the senior investment analysts at the firm apply the bottom-up approach to the fundamental analysis of share prices.
Explain why Evans and Partners would use this type of analysis.
Identify and discuss six different accounting ratios that should be included in a bottom-up approach model.
Identify and discuss three other performance measures that may be used.
- An investor is evaluating the use of the bottom-up and the top-down approaches to fundamental analysis. The investor wants to use the approach that will best enable the structuring of a diversified share portfolio that will achieve specified income returns and capital gains.
- Compare both approaches and propose a recommendation as to which approach the investor adopt – top-down or bottom-up or both? Provide sound reasoning for your argument.
- The top-down approach includes an analysis of the local economy in which a company is situated, plus the economies of major trading partner countries and the global economy more generally. Why would an investor be interested in forecasting changes in these economies?
INTRODUCTION
Measurement of performance of a company can be done in different manner or approaches. The two most important being the top-down approach and the bottom-up approach. Both the approach has the same use of analyzing the presentation of the organization from a financial perspective, but they vary in the way the assessment is conducted.
Here we will examine base up approach. In the given contextual investigation Evans and Partners, being a venture counseling organization, they chose to utilize base up approach for the examination of the execution of a share (Zahra and Said, 2014).
The main reason behind using the bottom-up approach for assessing the performance of share is that this approach makes and internal and deep analysis of the presentation of the organization. Instead, it believes that the company can perform well even there is an adverse condition in the outside environment. This approach uses several analyzing tools such as ratio analysis, to measure the presentation of the organization. Here we are not going to compare the company performance with the industry standard or performance. Here we will analyze the company performance in isolation. This is mostly used by the investors who are expecting to invest a huge amount in the company. This is so because bottom-up approach helps the large investors to assess the exact performance of the organization with in-depth analysis. And this analysis requires much effort and knowledge (Hilton, 2012).
From the above exchange, we have watched that bookkeeping proportions can be utilized for breaking down the execution of the organization. In this way taking after are a portion of the bookkeeping proportions utilized under base up approach for execution examination.
Turnover ratio – this proportion is figured as aggregate turnover of the organization by the aggregate resource of the organization. A Higher proportion is helpful for the organization.
D/E ratio – an organization is financed by both obligation and value, the obligation is outside source, and value is inside source along these lines it is alluring to have a lower obligation value proportion. Debt equity ratio = Debt divided by equity.
Liquidity ratio – this proportion measures the liquidity of the organization. It is just the present extent which is figured by disconnecting total assets by total liabilities, along these lines the more unmistakable the extent, the more it will be useful to the association.(Important Factors For Understanding Ratios Analysis:, n.d.)
Net profit ratio – this ratio determines the amount of profit earned by the company by using the resource of the company. The net profit so generated is either distributed to the shareholders of the company or is given for the future development of the company. The higher the net profit of the company the higher will be the net worth of the company.
Profit retention ratio – it denotes the portion of the distributable profit which is retained for development of the company.
(Thomas, 2015)
There are several other tools which can be used for performance measurement. Some of these are discussed below:
Trend analyzing: this implies assess the company’s financial performance over past few years. This will help to ascertain the growth trend of the organization. Percentage change in revenue by percentage change in investment.
Analyzing the director’s report which is available in the annual report of the organization.
From the company’s reputation or goodwill also the standing of the organization can be ascertained.
(Singh, 2015)
From the above discussion, we came to know that there are two approaches for performance analysis the top-down approach and the bottom-up approach. Both the approach has the same use of analyzing the presentation of the organization from a financial perspective, but they differ in the way the assessment is conducted.
Following are the comparison of both the approaches:
Top down approach is used by small investors who are large in numbers, and bottom-up approach is used by big investors;
The top-down approach investigates the execution of the organization after mulling over the monetary condition and the business in which it works. It doesn’t break down an organization and its execution in disengagement. Along these lines, while evaluating the execution of the organization, its outcomes are contrasted, and industry measures and execution, and after that lone speculation choices are taken. As per this approach, an organization’s execution is exceptionally affected by the execution of the business to which it has a place. On another hand, bottom-up approach does not take into consideration the economic condition, the business environment. Instead, it believes that the company can perform well even there is an adverse condition in the outside environment (Tugas, 2012).
Bottom-up approach involves much technical analysis as compared to the top-down approach.
As expressed above top down approach accept that the execution of an organization is profoundly affected by the monetary condition and execution of the business to which it has a place. This is so because the organization can’t keep running in separation and is reliant on the outside condition where it works. The execution of the organization is straightforwardly identified with the execution of the business and the financial condition in which the organization works. Along these lines, if there is an antagonistic condition in the market i.e. industry the organization will likewise be adversely affected. Subsequently while taking speculation choice; the speculators will mull over the financial and modern condition too (Obrien et. Al 2017).
CONCLUSION
There are two approaches for performance analysis the top-down approach and the bottom-up approach. Both the approach has the same use of analyzing the presentation of the organization from the financial perspective, but they differ in the way the assessment is conducted.
Listing on a stock exchange might be highly desirable for a company, but there are some requirements, conditions, and costs associated with becoming a publicly listed corporation. For example, Freelancer Ltd is one of the newest public companies to list on the Australian Securities Exchange.
Provide a broad overview of Freelancer Ltd AND identify and discuss the rights, roles, and responsibilities of Freelancer’s shareholders, board of directors and executive management now that it is a publicly listed company, including the specific requirements for Australian companies seeking general admission to the ASX and the ASX profit test and asset test requirements.
Explain why these rules are in place and how they contribute to an efficient stock exchange, support the interests of listed entities, maintain investor protection and impact will these have on the liquidity management of the firm and firm value?
Within the context of the ASX, explain why there are a requirement and need for continuous reporting.
INTRODUCTION
Every company desire to gets its securities marked on the stock exchange; this is so because by getting its stock marked on the stock exchange the company would be able to trade its securities and can raise money from the public as well. Moreover, listed companies are more popular and thus impact goodwill as well. But the listing of a company on the stock exchange is not easy and involves much cost as well. Thus before a company lists its security on the stock exchange the company is required to follow certain requirement (DLA Piper, 2013.
Listing of the securities in the stock exchange allows the company to trade its share in the market. Different types of securities can be traded on a stock exchange, for instance, equity shares, debentures, option, etc. We know that issuing of equity involves much cost as the company is required to follow several rules and regulation before getting the securities marked on the stock exchange. The stock exchange is a platform where the shares of the organization can be traded. By issuing an IPO, the company can raise money. Thus a listed company is a public company in which the public money is involved. In the given case we are required to discuss in respect of a newly formed public company who is in the process of listing on the Australian Stock Exchange (ASX, 2014).
Following is the list of requirement which the company is required to follow to get its shares listed on the Australian Stock Exchange:
The organization is carrying on suitable business as required for posting;
An individual must be chosen will’s identity accountable for correspondence with Australian stock trade.
The organization must be constituted according to the Corporation law;
The organization is required to have no less than 300 non-subsidiary shareholders in the organization;
The organization is required to have free buoy of 20%;
The affiliation ought to have a total preferred standpoint of A$ no under 10,00,000 from its working exercises from the underlying 3 years and at any rate 500,000 dollars from the last 12 going before months, or, an unmistakable resource of A$ 4 million or more discernible or market capitalization of 15 million dollars or more to get recorded.
((Safari, et. al. 2015)
The presenting decision should one be avowed at the general meeting of the shareholders of the association.
All the above-stated listing requirements are necessary because of the following reason:
Public money is involved in the listed companies;
Large companies would be able to handle market forces of demand and supply;
Increasing fraudulent activities conduct by many companies;
Making the listed company tradable in international terminal as well;
Increasing the reliability of the stocks.
(Mitchell and Matruglio, 2015)
From the above details, we found the reason for having stringent requirements before getting the shares listed on the Australian stock exchange, which is nothing but protecting the interest of the investors.
Before long when an affiliation is recorded for a stock trade the share of such affiliation winds up surely tradable, and in this way, any person or substance can change into the shareholder of the relationship by getting the shares of the relationship from the market. Like this we can watch that the general open exchange is joined out recorded affiliations.
Various fraud cases have been observed in the recent cases which led to a reduction in the trust of the investors on trading in the stock exchange. In the stock exchange, the price of the share is computed by the demand and supply forces. Now the demand is made by information available in the public domain. Now there are cases where some investors are having internal information about the future actions of the organization having financial impact purchases shares in advance. This helps that kind of investors to earn a higher profit than desirable. Moreover, sometimes many people speculate in share price. Thus it becomes necessary for the regulator to control all these activities within the limit so as to ensure that the investors are protected. It is the responsibility of the government and regulators to protect the interest of the investors.
Aside from forcing stringent necessities for getting the shares recorded on the Australian stock trade, the controllers of the stock trade have likewise forced a specific continuous prerequisite to guarantee that the recorded organization is executing as required for the enthusiasm of the partners all in all. As necessities are, the association is required to report half yearly and yearly budgetary declaration to the required regulatory. All these financial verbalizations are required to be assessed by the self-sufficient analyst of the association. This will ensure that the cash related clarification reflects an authentic and sensible point of view of the circumstance of the association.
For instance, there are cases where some investors are having internal information about the future actions of the organization having financial impact purchases shares in advance. This helps that kind of investors to earn the higher profit than desirable. Moreover, sometimes many people speculate in share price. Thus it becomes necessary for the regulator to control all these activities within the limit so as to ensure that the investors are protected (Khidmat and Rehman, 2014).
CONCLUSION
Finally, we could conclude that the reason for having a stringent provision of the listing and continuous reporting requirement is just to protect the interest of the investors and to keep in stability the capital market.
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