Wellfleet Bank Case Study
Wellfleet Bank Case Study
1. Given its strategy, what kind of risks does Wellfleet Bank face?
Wellfleet Bank faces a variety of risk in its daily operations. Risk faced by Wellfleet Bank associated with this case study includes market risk when there are changes in interest rates, exchange rates and other prices. This is especially true for Wellfleet Bank because they are considering a $1 billion loan to Gatwick Gold Corporation (GGC), a South African gold producer. Additionally, operational risk are linked through Wellfleet Bank 's daily activities that include auditing, monitoring and support systems. An example of operational risk for Wellfleet Bank would be when the group head of client relationships and the deputy group chief risk officer disagreed over a proposal, then the Chief Credit Officer would take the ultimate decision. Credit risk will be directly and indirectly affected by exchange rates, interest rates and gold prices. Moreover, foreign exchange risk and country or sovereign risk would directly impact Wellfleet Bank 's operations because it is an international organisation that has expanded operations to 78 countries (Lange, Saunders, Anderson, Thomson & Cornett 2007, pp. 96).
Other risk faced by Wellfleet Bank includes interest rate risk when maturities of its assets and liabilities are mismatched. Off-balance-sheet risk as a result of their contingent assets and liabilities. Technology risk when there are technological investments. Liquidity risk when they are sudden surge in liability withdrawals. Insolvency risk when Wellfleet Bank does not have enough capital to offset sudden declines in the value of their assets (Lange et al. 2007, pp. 96).
Wellfleet Bank 's strategy is to have different committees to monitor credit risk, market risk, operational risk, compliance risk, country risk, reputational risk, business risks threatening the consumer bank, and business risk in the corporate bank separately to keep them below preset limits.
2. Given
1. Given its strategy, what kind of risks does Wellfleet Bank face?
Wellfleet Bank faces a variety of risk in its daily operations. Risk faced by Wellfleet Bank associated with this case study includes market risk when there are changes in interest rates, exchange rates and other prices. This is especially true for Wellfleet Bank because they are considering a $1 billion loan to Gatwick Gold Corporation (GGC), a South African gold producer. Additionally, operational risk are linked through Wellfleet Bank 's daily activities that include auditing, monitoring and support systems. An example of operational risk for Wellfleet Bank would be when the group head of client relationships and the deputy group chief risk officer disagreed over a proposal, then the Chief Credit Officer would take the ultimate decision. Credit risk will be directly and indirectly affected by exchange rates, interest rates and gold prices. Moreover, foreign exchange risk and country or sovereign risk would directly impact Wellfleet Bank 's operations because it is an international organisation that has expanded operations to 78 countries (Lange, Saunders, Anderson, Thomson & Cornett 2007, pp. 96).
Other risk faced by Wellfleet Bank includes interest rate risk when maturities of its assets and liabilities are mismatched. Off-balance-sheet risk as a result of their contingent assets and liabilities. Technology risk when there are technological investments. Liquidity risk when they are sudden surge in liability withdrawals. Insolvency risk when Wellfleet Bank does not have enough capital to offset sudden declines in the value of their assets (Lange et al. 2007, pp. 96).
Wellfleet Bank 's strategy is to have different committees to monitor credit risk, market risk, operational risk, compliance risk, country risk, reputational risk, business risks threatening the consumer bank, and business risk in the corporate bank separately to keep them below preset limits.
2. Given
References: Lange, H., Saunders, A., Anderson, J. A., Thomson, D., & Cornett, M. M. 2007, Financial Institutions Management 2e, McGraw-Hill Higher Education. Leibenstein, H. 1987. Inside the firm: the inefficiencies of hierarchy. Cambridge, MA: Harvard University Press.