The cycle of events leading to the GFC is regularly described as a series of very bad
investment decisions, leading to serious losses, which in turn created a crisis in liquidity,
triggering a global credit crisis.
Given that brand organizations like Lehman Brothers, Bear Stearns, Meryl Lynch, who
are no more or AIG who were effectively nationalised, all had technically excellent risk
management systems, how to you explain the failure of risk management. What in your
view was the role of financial engineering i.e. the use of collateralized debt products,
contracts of difference and other credit derivative products in this disaster?
In your answer you are to consider the following issues:
1. Initially derivative products were a risk management device, so what
happened?
2. The interconnectivity between operational risk, liquidity risk, credit risk and
systemic risk?
3. The role of Governance and non-regulatory compliance in risk models?
4. What role will ISO31000:2009 play, if any, as the new global standard for risk
management, in creating an environment of resilience in the global economy.
Abstract/Executive Summary: (20 mark)
? Linkage between business decisions and risk context
? Role of financial Engineering in context shift
? How a shift in risk context can lead to crisis
? Relevant challenges for effective control of global
economy
Contextual Component/ Introduction: (20 Mark)
? Coverage of background of GFC
? Emergence of credit derivatives
Risk Theme Discussion: (50 marks)
? Coverage of risk principles in theme (10 Marks)
? Identification and use of case studies of relevance to
theme and any other research identified relationships
(15 Marks)
? Discussion of theme with reference to the four focusing
questions.(15 Marks)
? Extent of research (10 Marks)
Conclusion: (10 mark)
? Summarises identified issues
? Summarises relevant solutions
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