Managerial Decision Making Finance Department Always Plays Essay

Length: 10 pages Sources: 22 Subject: Economics Type: Essay Paper: #4320773 Related Topics: Managerial Economics, Managerial Accounting, Aig, Operations Decision
Excerpt from Essay :

Managerial Decision Making

Finance department always plays a dominating role in the long run productivity in an organization and hence the reasons why the organizations strive try to strengthen this strategic function (Andrew, 2009). Organizations primary objective is to increase the level of surplus by taking effective strategies and mitigating the expenses.

There are numerous challenges which the organizations face during its day-to-day operations but to combat with those challenges are the actual bravery of the organization (Andrew, 2009). During the operations, an organization faces number of challenges like financial challenge, capital challenges, economical challenges, and political challenges (Bish, 2005). Appropriate strategies and tactics are more than necessary to cope up with these challenges comprehensively (Brown & Kate, 2001). For this piece of work, we have to perform the risk analysis of a chosen company. While doing this assignment, one has to consider it as an expert consultant in multinational financial management department of the company and have to jot down the challenges for the company for the next five to ten years. The two areas which have been selected to analyze are Financial Risk Management and Foreign Investment Analysis. The company which has been chosen for this piece of work is Aviva. The report has been broken down into different sections; the first section is about the introduction of the company followed by the analysis of the two areas selected. Let's stick with the first section of the report and then derive the session of the analysis comprehensively.

Corporate Background: AVIVA

Aviva Plc is basically an insurance company in fact global insurance company which has its headquartering located in the London, United Kingdom (UK). Aviva Plc is known as the sixth largest insurance company operating on the earth in terms of revenue and asset's portfolio. The company has one of the largest pools of customers comprises on around 53 million customers with its operations in more than 28 countries. Apart from the UK, the group has its large active operations in the Continental Europe, Asia and North America (Brown & Kate, 2001). Aviva was basically the formation of a proposed merger between the Norwich Union and CGU Plc. The group was name first the General Accident Group, but later on it adopted the name of Aviva. Aviva engaged in expansion after the year 2003, when it expanded its network in different countries worldwide including the United States of America (USA). Apart from that the company also expanded in Australia and acquired the Australian wealth management business which later on interchanged to National Australian Bank of 825 million AUS$.

The company's main operational activities are general and life insurance along with long-term savings and managing of funds. From the operational activities, the company becomes able to billions of dollars every year and on the behalf of this money different executions of trade would have been initialized. The company has its active operations in more than 28 countries worldwide with large financial and human portfolio comprises on around £58,401 million and 46,000 employees worldwide as of the fiscal year 2010. The company is able to earn a net income of £ 1,892 million in the same year through its remarkable operations across the globe. The company is now expanding in Australia as well as it recently acquired the wealth management business in Australia. The company is very famous among the shareholders because of high growth of dividends every year. The shares of the company are trading in London Stock Exchange (LSE) and New York Stock Exchange (NYSE) with the name of AV and have been counted as one of the best 100 companies of the world according to the constitution of Financial Times Stock Exchange (FTSE-100) result. Let's now discuss the two areas which have been selected for this particular piece of work.

Financial Risk Management & Aviva

Management is basically a synergy of four dominating things which are Planning, Organizing, Leading and Controlling (Brown & Kate, 2001). The stir of management is present in almost every walk of life (Bettley & David, 2005)....


The management pertains to operation called operational management and the management pertains to human resources are referred as human resources management (Chris, 2001). Likewise it, the management pertains to financial of the company is called Financial Management. As per a Chinese Proverb,

A smart man learns from his own mistakes,

A wise man learns from the mistakes of others,

And a fool never learns

The association of risk is adheres with almost everything and field (Brown & Kate, 2001). From the aftermost decade risk management is the best researched and agitate breadth in the banking industry as it elaborates how to abbreviate and avoid the hazard of accident from the portfolios of altered assets and from the operations of banking institutions. Regulators and depositors are mainly accent on the accident management, as per them accident administration is an capital additive to enhance the amount of shareholders and access their akin of confidence (Brown & Kate, 2001).

Risk administration is the appraisal of risks to mitigate, adviser and ascendancy the anticipation or appulse on ambiguous events (Brown & Kate, 2001). Accident administration methods and attributes vary from industry to industry like it can't be aforementioned for activity management, automated action and banking portfolios (Brown & Kate, 2001). As an administration appearance point Accident administration is an important apparatus which is use in accommodation authoritative because it is analytical and able-bodied structured. For bigger appliance of accident administration in management's decisions, accident analyst's letters charge be based on the latest and best accessible information (Brown & Kate, 2001). The account abaft the advertence of the Chinese adage aloft is that accident administration is the alone apparatus which differentiates an acceptable administration with a bad one. Specifically the risk associating with the management of financials are referred as Financial Risk Management (FRM). In this section, we have to analyze the FRM association with the chosen company (AVIVA). Under the name of FRM, there are different categorizes of risk which are, market/economical risk, credit risk and operational risk. Let's now discuss each one subsequently by implementing it on Aviva.

Market/Economical Risk with Aviva

The association of market and economical risk is very important from the standpoint of an organization (Donald & Waters, 1999). Market risk association is merely for the financial institutions and insurance companies and Aviva is an insurance company, so the association of market risk is surely with it (Derek & Waller, 2003). It is one of the basic forms of the subject of the risk management which is widely researched in the current economic scenario (Brown & Kate, 2001). After the current economic downturn, this particular area has become the major point of emphasize of the organizations to manage the exposure of risk from its operations.

Market risk arises when there is a heavy fluctuation among the price of securities (Derek & Waller, 2003). Insurance companies usually make money by investing the premiums at a place from the likelihood of earning is high (David, 2008). The business is quite productive in those countries wherein the financial and capital markets are in a good node like the United States (U.S.), UK and Australia. From the analysis, it has been found that Aviva invested 75% of its portfolio in the risky assets like corporate shares, bonds and debentures to earn high profit and invested 25% of the portfolio in risk free assets like Mutual Funds and Treasury Bills. Aviva is among those companies that received serious jolts during the current economic downturn because of the shaky confidence of the consumers from the insurance and capital markets (Cinnamon & Larsen, 2006). The clouds of the economic crisis are still shadowing in Europe, so the probability of losing the money is very bright for Aviva. Aviva has to integrate its portfolio by effectively diversifying it (Jae & Joel, 1999). Diversification in a sense that large proportion should be invested in risk free securities like treasury bills, bonds and notes which although subject to lower economic profit for the company as a whole but also bring the consumers of the company under the net of low risk exposure (Leopard & Bernstein, 2004). The company has to use the techniques of Value at Risk (VAR) by which the maximum loss on a portfolio in a given day can be computed. VAR is curved by what are estimated to be accustomed market altitude and by the time aeon beneath consideration. It is affected that for an accustomed set of bazaar condition, the best the time aeon or horizon, (termed as Holding Period), the greater the amount at risk. This ad-measurement of accident is been more acclimated by armamentarium managers, banking institutions as able-bodied as accumulated treasurers as an arbitrary ad-measurement of the absolute accident of a portfolio. Let's now discuss the second category of FRM which is Credit Risk association.

Credit Risk and Aviva

Credit risk arises when your counterparty does not pay you the owed amount. Banks, financial institutions and insurance companies usually faced…

Sources Used in Documents:


Andrew, G (2009), Operation Management, Saga Publications

Bish, E, (2005) Managing Flexible Capacity in a Make-to-Order Environment Management Science, Prentice Hall Publications

Brown, S & Kate, B (2001), Operation Management: Policies and Procedures, Pearson Group Publications

Bettley, A & David, M (2005), A Strategic Approach to Operation Management, McGraw Hill Publications

Cite this Document:

"Managerial Decision Making Finance Department Always Plays" (2011, April 26) Retrieved June 25, 2021, from

"Managerial Decision Making Finance Department Always Plays" 26 April 2011. Web.25 June. 2021. <>

"Managerial Decision Making Finance Department Always Plays", 26 April 2011, Accessed.25 June. 2021,

Related Documents
Decision-Making Is One of the
Words: 4930 Length: 17 Pages Topic: Economics Paper #: 7272903

" To that end, the Treasury Department would limit executive compensation for institutions receiving "exceptional assistance" (Geithner and Summers, 2009). Troubles continued in the financial sector -- both Citigroup and the Bank of America needed second rounds of capital infusions, and federal guarantees against losses totaling tens of billions more -- while Ben S. Bernanke, the Federal Reserve chairman, warned that more capital injections might be needed to further stabilize the

Usefulness of Rational Decision-Making for Managers When Making Strategic...
Words: 2232 Length: 7 Pages Topic: Business Paper #: 77478288

Management "Critically evaluate the usefulness of rational decision-making for managers when making strategic choices" Characteristics of strategic decisions Long-term survival of the organization Scope of organization activities Resources and competences / Competitive advantage Then strategy is concerned with the strategic fit to the external environment Stakeholders' expectations Power in the organization - The expectations and worth of powerful agents in and around the company Strategy as Rational decision making Set objectives Understand problem Determine options Evaluate options Improvement in strategic decision making Involvement of different

Management and Decision Sciences From
Words: 25680 Length: 90 Pages Topic: Business - Management Paper #: 55501983

76). As automation increasingly assumes the more mundane and routine aspects of work of all types, Drucker was visionary in his assessment of how decisions would be made in the years to come. "In the future," said Drucker, "it was possible that all employment would be managerial in nature, and we would then have progressed from a society of labor to a society of management" (Witzel, p. 76). The

How Can We Make Profit Through Investing on Stock Market
Words: 11006 Length: 33 Pages Topic: Economics Paper #: 11392120

profit through investing on Stock Market Generally, all over the world financial markets exemplify a state of intricate and inscrutable situation. These marketplaces are of immense significance in the western nations, where the constituents employ their expertise to invest and generate profit whilst formulating a pool of funds, statistics, derivatives, shares and calculation intricacy. These constituents or elements are those investment maestros who are the whole and sole performers of

Framework for Awarding Audit Contracts by US Government Departments...
Words: 15848 Length: 58 Pages Topic: Accounting Paper #: 43068824

awarding audit contracts by U.S. government departments and agencies Audit Management Red Rationale for and Objectives of the project main and secondary Desktop or literature search Rationale for Search Methodology LITERATURE/DESKTOP RESEARCH Authoritative sources Desktop Findings Justification for audits Evolving role of auditors Types of audit contracts Understanding the Audit Process Best practices and benchmarking Terminology Case Studies Audit management is a fundamental element in government accountability, control and performance management. Certainly there is justification within the Federal government to conduct audits of contracts for the

Human Resources Management - Maintaining a Competitive
Words: 15260 Length: 55 Pages Topic: Business Paper #: 65440606

Human Resources Management - Maintaining a Competitive Edge in the Corporate Marketplace Change continues to reshape the workplace. Today's HR professional is called upon to help the organization retain its competitive edge in the marketplace. Along with representing the best interests of employees, HR professionals assume the role of strategic partner, administrative expert, and change agent. HR assumes a critical role in promoting the vision and shaping the focus of the