Goldman Sachs and Wisdomtree Investments

Business Improvements

Since the two companies operate in different target markets and with substantially different product mixes the recommendations must be customized for each firm. Goldman Sachs is considered a top trade recommendation for 2012 by many accounts as the firm is largely financially successful and the institutional client services dominate the businesses revenue stream (Craig, 2013). The most pressing recommendation for Goldman Sachs would be to integrate a more robust enterprise risk management system (ERM).

Risk management is becoming an important consideration for many organizations. There are several aspects to risk management that apply to Goldman Sachs and their current operating model. The 2008 financial crisis revealed many unseen sources of risk in the financial system. Although Goldman Sachs is considered to have one of the industry's best risk management systems, it stands that the company that the organization could further develop their model (Popper, 2012). Risk management is described as the practice of accounting for the potential risks that face an organization, determine what probability such exposure to risk has to the organization, and deciding how to best mitigate the various risk that is present. In many cases there is no effective way to mitigate the occurrence of various risks and the organization must instead form an action plan or a contingency plan as a response to the risk's occurrence. This was likely the case in the 2008 financial crisis which affected Goldman however some investors were able to predict the crisis.

Often a comprehensive ERM system will develop a set of internal controls, dashboards, and different metrics that can help to identify different types of risks nearly instantaneously. Goldman Sachs already has systems in place for the most common financial risks due to market fluctuations. In most cases the company has contingency plan already in place so that they can respond quickly to the risk. By reducing the time it takes to both identify and respond to the risk can also reduce the severity of the risk's potential influence upon the organization. However, the modern economy has a whole set of risks that have not been as prevalent in the past. These include such items as systemic financial risk, environmental risks, and political risks. Therefore, Goldman Sachs should continue developing risk screening tools as well as a comprehensive contingency plan to better forecast more modern risks. The ability to respond quickly to the occurrence of risks can be the organization's strongest defense against risk.

The recommendations for Wisdom Tree should include further diversifying the product mix. Wisdom Tree's financial services were rather target compared to the more diversified product mix such as the one offered by Goldman Sachs. WisdomTree is the only publicly-traded pure play ETF sponsor and the ETF industry is the most dynamic segment of the asset management industry (Steinberg, 2013). In 2012 the company recorded a better than thirty percent increase in revenue year-over-year which was, as Mr. Steinberg the company's CEO attributed to diversification. He added, "We built upon our impressive track record of product development, launching the industry's fourth most successful new ETF based on assets gathered in the first quarter. The WisdomTree Emerging Markets Corporate Bond Fund (EMCB), which listed on March 8, 2012, was the first ETF launched in connection with our sub-advisory collaboration with Western Asset Management Company. (Steinburg, 2012)"

By expanding the company's product mix the company was able to create new opportunities for revenue streams which reflected on the company's financial statement. It is recommended that Wisdom Tree further diversify its product offerings in as many complimentary market niches as possible. Given the volatility in the markets that has been shown in the last few years, diversifying the product mix is a key strategy for leveraging the company's exposure to risk. Furthermore, it has also represented Wisdom Tree's recent growth which illustrates that they likely have the internal capabilities need to further develop its financial products portfolio.