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

Investment Risk Management - Essay ExampleAdditionally, the company was reported bankrupt on 15th September 2008 and was ranged among the top 22 financial institutions that experienced the world largest bankruptcy (Ross, 2010). This collapse brought a big shock not only to the U.S economy but to entire world. This is because the company provided financial function not only to the affluent individuals and companies but also to the government. Among the services that were rendered by the company include banking services, fairness investments, consultancy services, buying and selling of treasury securities to mention just but a few (Sorkin, 2008). 1. Factors that contributed to financial disappointment of the Lehman Brothers Holding Company. According to Azadinamin, 2003 numerous factors contribute to failure of Lehman Brothers Holding Company. ... This led to higher cases of defaults as around of the house holds could not be able to repay the loans and interest rates that were attac hed on those loans. This thus led to the collapse of Lehman and brother holding company (Azadinamin, 2003). Additionally, manipulation of financial statement such as balance sheet contributed to failure of Lehman failure. For example it was reported that fifty billion dollars on loans commitment were measuredly removed from the balance sheet and recorded as sales in the income statements rather than loans. Connectively, the company was operational a negative cash flow statement prior to its collapse. Therefore, I could recommend to the senior commission of Lehman brother Company to perform credit selection and moral hazards prior granting mortgages (Azadinamin, 2003). Additionally, Lehman management should avoid wrong accounting practices and propagate high ethical standards in financial reporting. The company should have realistic and achievable strategies. For example, instead of buying assets and storing them, the company could transfer them to third party and earn more ret urns. Lehman management concentrate only at evaluating the balance sheet and ignored cash flow evaluation, making it difficult to name the potential risk that led to its collapse. Therefore, I could have recommended Lehman management to evaluate all its financial statements in order to detect risk and failures before they occurs and establish necessary mechanism to deal with such failures (Azadinamin, 2003). 2. adequacy assessment of risk management techniques used by financial institutions today Financial