Credit Risk:
Credit risk involves the possibility of borrowers, bond issuers or other counter-parties defaulting in transactions. In class we learned about various ways to estimate default probabilities, including historical data, CDS spreads, bond prices or asset swaps or Merton’s model.
Sun Life has established a wide range of risk management controls to manage credit risks. Income and regulatory capital sensitivities are monitored, controlled and reported against their pre-established risk limits. Due to the nature of insurance products, investment diversification is needed to match their various liabilities. Investment limits are defined at Sun Life, which include asset class, geography and industry limits. Use of credit quality ratings
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The transactions introduce some risks of financial loss due to the failure in achieving the expected financial or strategic objectives. The financial or strategic benefits may not be realized due to competitions, regulatory requirements or other factors. One business risk involves effectively integrating the transferred businesses. Also, restructuring or reorganization of the businesses after transactions have been closed can be risky too. In terms of operational risks, integrating operations, especially the differences in organizational culture, can be a problem and may require significant management resources. Management’s attention from day-to-day businesses can be distracted. Thus, those synergies may not be realized if integration is not successful. Nevertheless, Sun Life tries to mitigate the risks associated with the integration of businesses by establishing procedures to oversee the execution and integration of M&A transactions. On the other hand, there could be potential market risks associated with the acquisition, as the investment returns depend heavily on market conditions. In particular, Sun Life is entering the emerging markets, which could be a bit risky even though they provide higher returns and growth opportunities. Some possible risks associated with emerging markets include lack of liquidity, political risks, foreign exchange rate risks, …show more content…
With the well-established risk management framework, we believe that Sun Life is able to tackle those risks to the best of its ability and minimize potential
every 100 contracts the company buys 2 will default on the loan. There is a 2% chance of default
One mode to achieve the comprehensive healthcare services is through the mergers and acquisitions. However, during the course when the integrated company takes place, there are many challenges that the new company should deal to have concerted mission to achieve the desired goals.
Which sense that, Sun Life earns more net income per $1 of sales than some or even most of its competitors. Sun life’s days’ sales uncollected 58.8days7 is favorable when compared to its industry’s average of 98.59 days. This means that Sun Life access its money in receivables faster than some or most of its competitors. Sun life’s equity ratio shows that the owners of the company only owns 10.18%8 of the company’s assets. Compared to its industry average, Sun Life can be rated as more favorable. Sun life’s debt ratio of 90.35%9 is higher than its equity ratio this is considered risky because the huge percentage of its asset is supported by debt. However, Compared to its industry average of 93.2% it is still considered favorable. Sun life’s return on total assets is 0.798%10 this favorable compared to its industry average of
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
There are three types of life insurance that most insurance companies offer, which are, universal, whole, and term. Universal life insurance is a permanent policy consisting of two parts, which are term insurance and an investment/cash value feature-which is interest bearing. The premiums for the plan allow the policyholder to pay a minimum rate when necessary or to pay the maximum and provide funds to the cash value of the policy. The more that’s paid into it, the bigger the investment/return. With the cash value of the plan, fees are deducted for the costs of the plan and the policyholder receives payment from the interest of the remaining balance. Universal offers clients a definite minimum interest rate on the cash value. Some insurance companies offer a tiered interest rate that pays policyholders a fixed percentage up to a certain amount, then a higher interest rate on balances above that threshold.
Sundiata is an epic of a powerful king who expanded the Mali empire to a great territorial area and he did so because he was destined. My mother read me a more simplified story of Sundiata as a child and through reading this book, I remembered so many lessons and African cultural traditions that I learned as a child. There were several interesting aspects of this epic that reflected some of the material we have learned thus far in class as well as other interesting themes that are repeated throughout it. Sundiata is an epic that recounts a historical event while teaching various African ideologies.
Rousmaniere, Peter. “Facing a tough situation.” Risk & Insurance 17.7 (June 2006): 24-25. Expanded Academic ASAP. Web. 23 March 2011.
The soft factors can make or break a successful change process, since new structures and strategies are difficult to build upon inappropriate cultures and values. These problems often come up in the dissatisfying results of spectacular mega-mergers. The lack of success and synergies in such mergers is often based in a clash of completely different cultures, values, and styles, which make it difficult to establish effective common systems and structuresBased on the case study, extensive research and annual reports of AT&T the writer has mapped AT&T in the different domains. AT&T should strive to attain a perfect circle as close to the centre as possible, which indicates total synergy, order and equilibrium. Where the circle is skewed drastic change is needed as it moves closer to the outer ring of chaos:
The risk mitigation activities for this company should involve learning on the trends of the industry so as to make sure that they remain competitive. This will make their finances to perform consistently well and investors will be impressed and invest even more. As well, the company should do research on shows hat that
Mergers and acquisitions immediately impact organizations with changes of rights, and ideas and eventually, in practice. There are multiple reasons some are motives and financial forces just to name a few. There are financial risks of merging with or acquiring an organization this is why you must have a strategic plan in place in order to benefit.
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.
The company recognizes that it is subject to both market and industry risks. We believe our risks are as follows, and we are addressing each as indicated.
J. David Cummins, A. S. (1999). Changes in the Life Insurance Industry: Efficiency, Technology and Risk Management: Efficiency, Technology, and Risk Management. Springer.
The first two do not require the acquired business unit to be connected with the existing units; the second two depend on connection. Although the concepts are not always mutually exclusive, the way in which they generate value for the corporation is different for each. The portfolio management balances current business activities with new industry acquisitions. Its success is undervalued acquisition meets attractiveness and COE test. The challenges are: increased capital market competition, need for industry specific knowledge, and growth of the company and diversity. The restructuring seeks underdeveloped or sick companies and industries. Its successes are: utilize and pass the three tests and ability to find undervalued companies with growth potential. Its challenges are: restructurer exposed to more risk, time limit for success, hold onto a restructured company, and growing depletion of restructuring pool with increased competition. The transfer of skills involves activities important to competitive advantage. With transferring skills, business activities are similar enough that sharing knowledge would be meaningful. However, skills must be useful to key business activities and must be beyond competitors’ capabilities. The ability to share activities has been a potent basis for corporate strategy because sharing often enhances
Over the past decade, risk and uncertainty have increasingly become major issues which impact business activities. Many organizations are raising awareness to minimize the adverse consequences by implementing the process of Risk Management Framework which plays a significant role in mitigating almost all categories of risks. According to Ward (2005), the objective of risk management is to enhance a company’s performance. In particular, the importance of the framework is to assist top management in developing a sensible risk management strategy and program.