Analyzing. Risk Management, Corporate Strategy, andRecommendations
Thisparticular paper provides detailed evaluation and analysis of theWaterstone Financial Inc. risk management, corporate strategy andproviding recommendations as the company acting CEO. This paper alsoanalyzes the Waterstone Financial Inc. existing risk management andthe international strategies that will assist the company reduce itsrisks and embrace its production (Barboza, 2010). According to theanalysis, the company’s current position is positive which meansthat the company is fighting to manage its risks, costs and alsoenhancing its corporate strategy.
Actingas . CEO, I will design a few strategiesthat would assist the company grow its earnings and reduce its risksin the business operations.
WaterstoneFinancial, Inc. operates as the Waterstone Bank holding firm thatoffers services to customers in Southern Wisconsin. The corporationoperates community banking and mortgage banking divisions. Thecommunity banking division provides banking and consumer servicessuch as deposits and transactional solutions while the mortgagebanking sector provides residential mortgage loans for the soleprinciple of sale on the derived market. The company is one of thelargest financial institutions with its headquarters in Wisconsin,USA. . began its operations in 2008, but itwas founded in 1921 and is based in Wauwatosa, Wisconsin USA. As at2015, . had net revenue of USD 166.4 Millionand net income of USD 16.6 Million from its operation (WaterstoneFinancial, Inc. Finacial reports, 2015).
WaterstoneFinancial, Inc. risk management and international strategies
Hedgingtheir currency exposure through the use of financial derivatives
Riskmanagement in . is considered to be theprocess that involves identifying, alleviation of variousuncertainties and analysis in the making diverse decisions ininvestments. Risk management simply occurs when a fund manageranalyzes and attempts to quantify the loss probability in aparticular investment and they undertake an appropriate actionprovided their risk tolerance and the objectives of the investment(Griffiths, & McLean, 2015). . aspect ofrisk management was extremely broad as it covers several forms ofprobable impairment because of its nature of the operation. Accordingto the . financial statements, the companyhas diverted its attention to the aspect of hedging currency risk inmultinational business and limiting the risks associated with keyprices and costs so as to manage its vulnerable risks. The companyhas embraced the aspect of turning its dollars into sense becauseaccording to the United States of America Department of States,several American businesses such as . aredoing more than $2.5 trillion worth of business outside the UnitedStates of America borders.
Thecompany ensured that it embraces currency hedging technique which isa crucial practice for the financial success of the business. In thepresent world, several firms hedge their currency exposures throughthe use of financial derivatives that . alsoembraced because the company management was determined that over thelong haul, fluctuation of foreign exchange are a wash which sometimesexpensive to protect against the exchange rates impact. According toone analyst, a 10% increase in the USD could remove up to 15% fromthe stock market value of . The companiesthat are usually successful always try to expand internationally.Several multinational firms have become more actively involved in thehedging currency exposure through the use of financial derivativessimply because of the expanding nature of their sales abroad(Economist, 2010). Companies that increasingly carry out theirservices abroad have to deal with the microeconomic risks associatedwith the aspect of international trade. According to the companyannual reports, the company took diverse hedging steps so as toprotect themselves from currency exchange risks because currencyeffects on corporate earnings are often thought to be minimal innature.
WaterstoneFinancial, Inc. expanded its business to Europe and Asia as onemethod of managing its risks because of pending unforeseencircumstances. It is believed that the United States of America hasreached its maturity state making its economy just not grow at a muchrapid pace that it once did. The company management ensured that thecompany moved abroad because it is also believed that that the restof the world has embarked on a massive economic realignment making itmore viable for business because the company long-term debts shouldbe further hedged so as to bring down the debt exposure at floatingrate (Economist, 2010). According to the .financial statements, the company has extended its businessoperations abroad as it is one of the measures that ensure its riskmanagement concept effectively. Moving abroad is another aspect thatthe company exercised so as to manage it risks because basically, acompany that moves abroad will increase its production because of thedifferent tax laws, foreign firms advantages and government grantsthat will place the company into a more competitive company in thenew market (Jackwelch Management Institute. Financial Management II,week nine, lecture one).
WaterstoneFinancial, Inc. has embraced its corporate strategy using the aspectof financial derivatives that entails creation and analyzinginformation about each kind of goods and services to ensure that theproduced service is maintained at a higher quality than itscompetitors. Itis usually best idea for the firm to ensure that it works togetherwith the government in order to meet the stated regulations and lawsthat will provide the desired CSR to the business environment. Theuse of financial derivatives cheaply and in effectively out theentire firm at risk but far too often this kind of tool has simplyevolved into a profit center of their own. According to the. financial statements, the companydistributes its corporate strategies that assisted create anorganizational competitive advantage in the foreign market (JackwelchManagement Institute. Financial Management II, week eight, lectureone).
Inthis particular corporate strategy, making the goods and servicesavailable and favorable to both existing and potential customers willembrace its production. Reducing the loans interest rates for the newcustomers is a strategy evident in the company financial annualreports because lowering the rate paid from the loans taken mainlyattract more clients as they seek financial assistance from thefinancial institutions (Economist, 2010). For example, China has aneconomy that is simply too large and rapidly growing and it this wasthe main reason that the company expanded its business to thecountry. Firms in the country usually report high level ofimprecision in the numbers because it is considered part of doingbusiness in the foreign land.
Recommendationthat I would make as an acting company CEO
Basedon risk management and international strategies, since fundsmanagement is usually riskier, I recommend that the WaterstoneFinancial, Inc. management should hedge some currencies in a shortterm basis and some funds in an oversee business in a medium to shortterm basis (Nwagbara, 2011). This aspect helps to reduce the businessrisks and hence increase in overall production. Hedging somecurrencies on the short-term basis will ensure that the company cutcosts that would have been expensive for the business. I alsorecommend that the . management hedge longterms debts do as to bring down the debt exposure. WaterstoneFinancial, Inc. management should also use more of the financialderivatives so as they could hedge against the currency risk whichusually form a bigger challenge in the management of financial risksby a company (Jackwelch Management Institute. Financial ManagementII, week nine, lectures two).
Barboza,D. (2010, August 15). China passes Japan as second- largesteconomy. The New York
Griffiths,M., & McLean, R. (2015). Unleashing corporate communications viasocial media: A
UKstudy of brand management and conversations with customers. Journalof Customer Behaviour,14(2),147-162.
JackwelchManagement Institute. Financial Management II, week eight, lectureone
JackwelchManagement Institute. Financial Management II, week nine, lecture one
JackwelchManagement Institute. Financial Management II, week nine, lecture two
Nwagbara,U. (2011). Waterstone’s and the Changing Bookselling Environment inthe UK: the
Journeyso far and Prospects. Petroleum-GasUniversity of Ploiesti Bulletin,62(3).
TheEconomist (2010, October 9). How to grow: A special report onthe world economy.
Retrievedfrom http:// www.economist.com/node/17173886?story_id=17173886
WaterstoneFinancial, Inc. Finacial reports (2015) Retrieved from