Risk Management Essay Example | Topics and Well Written Essays - 1250 words - 1

Risk Management - Essay Example Most Significant Themes Risks Associated with Fiscal Issues Fiscal risks are another area that was significant to me because of the government’s role in provision for public utilities and in ensuring a potential to control the economy. The most significant risk that is associated with fiscal issues is the scarcity of sources of funds for the government. The government borrows money through bonds that it creates but the market for such bonds may be stretched. Additional bonds in the market is for example associated with anticipated increased interest rates and this is a challenge because lack of finances is the reason for floating bonds and the increased interest rates may be too unbearable for the government. Inability to fund an economy’s budget and pay for existing debts further worsen the risk of scarce resources. Debt limit under fiscal policies is another significant risk (Malin n.p.). While existence of debt is a significant destabilizing factor, established statu tory limits create increases levels of uncertainties among stakeholders such as investors and creditors who may identify future economic instability or the government’s inability to repay its existing debts. ... Government’s ability to advance incentives is another potential risk (Malin n.p.). Diversified policy measures however exist to for preventing the risks from occurring and even managing their impacts in case of occurrence. A review of a fiscal scope that focuses on a wider scope than the budget, debt, and analysis of potential risks in a portfolio are examples. Being strict to operate within predetermined limits is another measure to managing potential exploitation in contracts. Further measures such as analysis of principle fiscal risks and debt sustainability vulnerabilities and review of fiscal inefficiencies and probable liabilities are significant to management of fiscal related risks. Analytical approach to impacts of the fiscal risks is another approach to mitigating effects of the risks (Malin n.p.). Risks of debt limits can also be managed through fiscal policy initiatives. The Federal reserve can for example reduce investments in some public funds and concentrate on demanding needs as a strategy to reducing expenditure and the need for more debt. While sale of debts offers opportunities for reducing debt levels, nonmarketable debts may not be successful and their sale should be suspended. The government can also limit auctions on some securities and even reduce some of its expenditures such as social security benefits payments and advances to some creditors and vendors (Malin n.p.). Foreign Exchange Risk The concept of foreign exchange risk is one of the most significant themes that I derived from the course. Its significance emanates from the increasingly globalized environment that ensure cross border interaction among governments and private sector institutions. The interactions are further associated