Poor Risk Assessment and Financial Disaster

Poor Risk Assessment and Financial Disaster

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Poor Risk Assessment and Financial Disaster

Poor risk assessment can lead to financial disaster for individuals, businesses, and even entire economies. One example of this is the 2008 financial crisis, which was caused in part by poor risk assessment on the part of banks and other financial institutions.

These institutions had invested heavily in subprime mortgages, which are home loans given to borrowers with poor credit. They had assumed that the housing market would continue to rise, and that these borrowers would be able to pay back their loans. However, when the housing market crashed, many of these borrowers defaulted on their loans, causing widespread financial losses for the banks.

Another example of poor risk assessment can be seen in the case of Enron, a large energy company that went bankrupt in 2001. The company had used accounting tricks to hide its massive debt, and had invested heavily in complex financial instruments that were difficult to understand and value. When the truth about the company’s financial situation was revealed, investors and creditors were left with significant losses.

Poor risk assessment can also occur at the individual level. For example, an individual may take on too much debt, invest in risky assets, or fail to save enough for retirement. These actions can lead to financial hardship in the future.

To avoid financial disaster, it is important to conduct thorough risk assessments and to diversify investments. This means spreading out investments across different assets, such as stocks, bonds, and real estate, rather than putting all of one’s money into a single investment. It also means being realistic about the potential risks and returns of an investment, rather than relying on overly optimistic projections.

Furthermore, financial institutions should be regulated by government agencies and should have a proper internal control system to monitor their risk management process. The regulators should also conduct regular stress testing and scenario analysis to ensure that these institutions can withstand unexpected market events.

In summary, poor risk assessment can lead to financial disaster for individuals, businesses, and even entire economies. To avoid financial disaster, it is important to conduct thorough risk assessments and diversify investments, be realistic about potential risks and returns, and have proper regulations and internal control system in place.

RUBRIC
Excellent Quality 95-100%	Introduction 45-41 points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.		Literature Support 91-84  points The background and significance of the problem and a clear statement of the research purpose is provided. The search history is mentioned.			Methodology 58-53 points Content is well-organized with headings for each slide and bulleted lists to group related material as needed. Use of font, color, graphics, effects, etc. to enhance readability and presentation content is excellent. Length requirements of 10 slides/pages or less is met.
Average Score 50-85%	40-38 points More depth/detail for the background and significance is needed, or the research detail is not clear. No search history information is provided.		83-76  points Review of relevant theoretical literature is evident, but there is little integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are included. Summary of information presented is included. Conclusion may not contain a biblical integration.			52-49  points Content is somewhat organized, but no structure is apparent. The use of font, color, graphics, effects, etc. is occasionally detracting to the presentation content. Length requirements may not be met.
Poor Quality 0-45%	37-1 points The background and/or significance are missing. No search history information is provided.		75-1 points Review of relevant theoretical literature is evident, but there is no integration of studies into concepts related to problem. Review is partially focused and organized. Supporting and opposing research are not included in the summary of information presented. Conclusion does not contain a biblical integration.			48-1 points There is no clear or logical organizational structure. No logical sequence is apparent. The use of font, color, graphics, effects etc. is often detracting to the presentation content. Length requirements may not be met
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