Write a four to five (4-5) page paper in which you:
Determine what your selected organization would need to take into account when managing interest rate risk and the related impact it may have to business performance.
Examine how the bank’s risk management plan uses derivatives. If they don’t currently use derivatives, then assess whether or not this can be a valuable tool for them. Provide support for your rationale.
Examine how the bank’s risk management plan uses other hedging tools. If the bank does not currently use any of them, then assess whether or not these can be valuable tools for it. Provide support for your rationale.
Propose a major investment for the organization you selected. Support your recommendation with net present value, pertinent financial ratios, and break-even analysis.
Propose ways that time value analysis would help your selected organization make sound management decisions. Use specific examples to illustrate your response.
Assess the current liquidity position of the bank, suggesting improvements needed or ways the bank can leverage its position. Provide support for your rationale.
Use at least three (3) quality academic resources in this assignment. Note: Wikipedia and other Websites do not qualify as academic resources.
Your assignment must follow these formatting requirements:
Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow APA or school-specific format.
Apply the tools for managing and hedging against risks.
Examine the process of managing investment portfolios and liquidity positions for financial firms.
Use technology and information resources to research issues in commercial bank management and operations.
Write clearly and concisely about commercial bank management and operations using proper writing mechanics.
This material may consist of step-by-step explanations on how to solve a problem or examples of proper writing, including the use of citations, references, bibliographies, and formatting. This material is made available for the sole purpose of studying and learning - misuse is strictly forbidden.Introduction
This report presents an analysis of the risk management strategies of Wells Fargo. The company is involved in the business of providing banking, insurance, mortgage, investments, consumer and commercial finance through the channels of stores, ATMs and the Internet. The foundation of the company dates back to 1852 and it is headquartered in San Francisco. The company has globalized with its operations spread across 35 countries. Due to the diverse nature of its operations, the company is exposed to high levels of risk also (Wells Fargo Annual Report, 2013).
Impact and Management of Interest Rate Risk by Wells Fargo
Interest rate risk can have a sizeable impact on the revenues and the profits of the company since the bank is involved in the business of providing loans and raising deposits. Changes in the interest rates can influence the net income margin of the bank. The exposure to interest rate risk stems from several factors. One factor is that the assets and liabilities of the Bank may re-price or mature at different time intervals causing duration mismatch....