MONASH UNIVERSITY FACULTY OF BUSINESS AND ECONOMICS DEPARTMENT OF ACCOUNTING AND FINANCE SEMESTER ONE, 2017 UNIT NAME: INTRODUCTION TO RISK PRINCIPLES UNIT CODE: BFF 5902 Assignment 2 The assignment is to be submitted in both electronic and hardcopy formats as required and listed in the unit outline. Electronic format is to be emailed to Warren Gillian and the hardcopy is to be delivered to the assignment box provided on the 3rd floor of building H by due date for all students. Failure to undertake these instructions will result in your assignment not being accepted for marking. This Assignment is to be carried out in accordance with the Assignment guide outlined in the course Unit Guide; failure to do so will result in loss of marks. It is to be an original work of approximately 3,000 words excluding table of contents, headings, index, footnotes, attachments and references. The assignment must demonstrate that the student has carried out extensive research and is worth 25% of your final mark. NO EXTENSIONS TO DUE DATE will be considered unless supported by medical evidence; even with this evidence the request may be declined. There will be absolutely no extensions granted for non-medical reasons. Penalties will accrue for late submission at the rate of 10marks per day, for the first 10 days. Assignments received after this period will be read to provide feedback only. No assignments will be accepted for marking after this period. Due Date: For all students the assignment is to be submitted by Friday 5th May 20147by 5pm (Week 9). Your assignment is to be an original piece of work, note unit outline re plagiarism. Assignment Penalties:  No Cover Sheet: ‘Assignment not marked’: minus 10 marks/day until it is presented in signed hard Copy.  No Signature on Cover Sheet: minus 10 marks/day until it is presented in signed hard Copy. Failure to submit both Hard and Soft copy of assignment: ‘Assignment not marked’: minus 10 marks/day until both formats are presented.  Late submission of assignment: minus 10 marks/day until submission.  Incorrectly filled out cover sheet other than failure to sign: minus 5 marks. Assignment Marks: 25% of total marks for this unit. You are required to write an essay of no more than 3000 words commenting on the following statement. “The cycle of events leading to the GFC is regularly described as a series of very bad investment decisions (operational risk), leading to serious losses (financial risk), which in turn created a crisis in liquidity (liquidity risk), triggering a global credit crisis (credit risk).” 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 do you explain their catastrophic failures. Also consider the role of financial engineering i.e. the use of collateralized debt products, contracts of difference and other derivative type products in this disaster? In your answer you are to consider the following issues: 1. The interconnectivity between operational risk, credit risk and systemic risk? 2. Initially derivative products were a risk management device, so what happened? 3. The role of Governance and non-regulatory compliance in risk models/frameworks. 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. 25 Marks