The paper "Risks Facing the Wellfleet Bank " is an outstanding example of a management assignment. The organizational system in the market is facing a wide range of challenges in the financial market. In this regard, the system, with the advent of the global financial crisis in 2008, the risk system and practices were changing. On one hand, one of the rising risks and challenges was the default risks. Duffie (2011, p. 109) stated that default risk is the probability that an organizational debtor fails to pay up and cover for loans advanced to them.
Consequently, in such instances, the lending financial organisations classify such credits as bad debts and write them off their books. Although the financial market is characterized by default instances, risk management systems have enabled such lenders to reduce the challenges. However, the Wellfleet Bank is facing an increasing default risk in the wake of the global financial crisis. In this regard, the global financial system has implicated on a majority of the organisations financial well being. As such, changing costs of production as well as reducing consumers purchasing powers implicated negatively on overall organizational product demands as well as income margins. Therefore, this reduced the organisations overall earnings leading to a declining ability by the ventures to meet their needs as well as cover the overall debt owed to creditors.
As such, with increasing implications of the global financial crisis on the organization, the risk of default is increasing rapidly. In this regard, the Wellfleet Bank risk management system is developed and based on an internal credit evaluation system where each of the debtors both retail and corporate is ranked to evaluate their default risks, a virtue adopted to develop the relevant interest rates.
An example of default cases in the venture could be cited in the retail section where the value has increased since 2004 from a $ 214 million to $761 million in 2007, illustrating the growing loan default risk for the venture. Political Risks An additional organizational risk that the bank, the face is the political risk. In this regard, although the financial market functions independently, it relies on the existing good political will in the respective markets.
As such, any changes to the political goodwill front change the overall financial industry operations. In this case, the Wellfleet Bank faces a changing political risk system in the Asian and African markets. In this regard, the regions face rapidly changing political systems with increasing agitation and strive for increased democratic governments. One of the challenges is political instability that increases the risk of loan repayment failures. In this case, although the respective organisations may be willing to pay up the loans, the cost of production and income levels may make such organisations insolvent (Aksoy and Beghin, 2004, p. 151). As such, the bank has to regularly reschedule and adjust such organizational loan repayment systems.
Therefore, this leads to the risk of the organization running insolvent itself, thus failing to cover and meet up the operational costs in the short-run period. In this case, the political challenges, although indirectly affecting the organisation, pose a major operational efficiency, the risk that should be mitigated and overcome proactively. In order to counter this challenge, the venture has established a wide range of risk evaluation committees that report directly to the executive on a quarterly basis.
One among s the political risk evaluation committee that develops recommendations and forecasts on specific countries. As such, this ensures that the system has a proper and relevant forecast and insight on any political developments in which the recommended interest rates are evaluated.