Economic Risk Mitigation Proposal

 

 

Order Description

 

 

 

 

Prompt
With attention to the amount of information you are able to derive from sources reasonably available to you and which are amenable to citation and verification, select a publicly traded company
headquartered in the United States and listed on a national securities exchange.

Imagine that you have been hired to consult with the publicly traded company’s management team during a period of managerial transition. You have been hired to evaluate the risks this firm faces in
the near and medium term, to allow the management team to advise the board of directors appropriately. Assume managers are new to the firm and unfamiliar with its operations and the economic
environment in which it operates, but that they are familiar with general business practice. Evaluate the implications of government fiscal and monetary policies and business cycle phenomena for
the firm you selected. In light of existing evidence, assess which areas of this firm’s operations are significantly influenced by macroeconomic fluctuations in output, interest and prices
associated with business cycle phenomena, or policy decisions made by the federal government. Present conclusions that can be drawn regarding challenges or opportunities specific to this firm, and
provide a plan for mitigating any risks that the firm might face due to systematic factors in particular.

 

For your economic risk mitigation proposal, you must create a professional paper and apply the theories and concepts from the course to construct a polished proposal encompassing your analysis of
systematic risks faced by this company, its economic outlook, and a plan that may be implemented to mitigate risks.

Specifically, the following critical elements must be addressed:

I. Identification of Risk
a. Using the aspects of risk outlined in Chapters 5–8, identify the types of economic risk that certain broad varieties of activities expose business entities to.
b. Identify and describe two areas of your chosen firm’s operations that are subject to significant economic risk of each of the following: idiosyncratic, systematic, and systemic varieties.
c. Identify specific macroeconomic variables that are associated empirically with an increase in the identified varieties of risk, and which may indicate increase or decrease in systematic and
systemic risk specifically.
d. Graphically and/or mathematically illustrate a movement in macroeconomic variables that would theoretically be associated with this risk.

II. Analysis of Macroeconomic Data
a. Document recent fiscal and monetary actions taken by U.S. authorities addressing business cycle phenomena.
b. Calculate annual percentage changes in GDP and the Consumer Price Index (CPI-U) in the United States from 1948 to the current year.
c. Partition your data into the periods of 1948–1972, and from 1973 to the most recent year available. Plot annual percentage changes in GDP for these two periods. Compute a trend and assess
variation, and describe patterns that you discern in relation to what you know about business cycle fluctuations.
d. Consult FRED (Federal Reserve Economic Data) to determine what has been identified to be the natural rate of unemployment and the current rate of unemployment in the current period. Using the
FRED data, characterize the current relationship between actual and potential output (Okun’s law may be used to guide your assessment).
e. In light of what you identify to be the current relationship between actual and potential output, and the policy actions documented in “step a” above, graphically or mathematically illustrate
the current macroeconomic risk factors and explain why this result is of significance to the firm that you are considering.
f. Describe the theoretical basis of each documented policy action that you have assembled and, using data collected here, evaluate its effectiveness. Did the policy achieve its intended economic
outcomes? If so, what indicates that it was successful? If it was not successful, why did it fall short? Use examples to illustrate your point and back up your argument with research.

III. Implications of Government Fiscal and Monetary Policies on Firm’s Business
a. Apply your analysis of macroeconomic data and recent policy and policy effectiveness completed in Part II to predict trends in GDP growth, inflation, and interest rates.
b. Identify likely effects of predicted trends on your chosen firm’s operations. In other words, what should managers be especially attentive to, based on your research? Use examples to illustrate
your points and back up your argument with research.

 

c. Based on your conclusions regarding areas of risk that are systematic in origin, describe one or more ways that the firm’s operations may be significantly influenced by shifts in money and
capital markets, and government regulation of these.
d. Identify and describe one ongoing policy initiative currently underway that might raise or mitigate systematic risk, if it is successful. Describe the empirical or historical basis of this
action, and evaluate the potential effectiveness of this policy. Illustrate the theoretical basis of this action using research. If this action is successful, how will this be beneficial or
detrimental to the firm you have selected to review here?

IV. Conclusion: Economic Risk Mitigation Proposal
a. Propose strategies to mitigate systematic economic risk for your firm. Be sure that your strategies are justified, based on your own research of macroeconomic data, economic outlook, and
identification of possible risks expected in the next 1-5 years.

 

 

Milestone One: Identification of Risk (Section I)

Milestones

In Module Three, you will submit a 2–3 page paper introducing a firm based in the United States. Following steps outlined in Section I above, and using the aspects of risk outlined in Chapters 5–8
of your textbook, identify the types of economic risk that certain broad varieties of activities expose business entities to. Identify areas of your chosen firm’s operations that are subject to
significant economic risk and identify, using relevant data, those areas of risk to the firm that are idiosyncratic. Contrast these with areas of risk that are systematic and result from
macroeconomic factors, such as swings in consumer and business confidence brought on by global economic conditions, or changes in policy, which produce systematic risks that affect all firms and
individuals in the entire economy. Identify specific macroeconomic variables that are associated empirically with an increase in the areas of risk identified for this firm, and which may indicate
an increase or decrease in systematic and systemic risks specifically. Graphically and/or mathematically illustrate a movement in macroeconomic variables that would theoretically be associated with
this risk. After incorporation of instructor feedback, this milestone will be incorporated into your economic risk mitigation proposal. This milestone is graded with the Milestone One Rubric.

Milestone Two: Analysis of Macroeconomic Data (Section II)
In Module Five, you will submit a 4–6 page paper presenting your analysis of macroeconomic data following the steps outlined in Section II above. Document recent fiscal and monetary actions taken
by U.S. authorities addressing business cycle phenomena. You will use your GDP and Consumer Price Index (CPI-U) calculations to compute a trend, assess variation, and describe patterns that you
discern in relation to what you know about business cycle fluctuations. Consult FRED (Federal Reserve Economic Data) to determine what has been identified to be the natural rate of unemployment and
the current rate of unemployment in the current period. Use the current relationship between actual and potential output to graphically or mathematically illustrate the current macroeconomic risk
factors and explain why this result is of significance to the firm that you are considering. Describe the theoretical basis of each documented policy action that you have assembled and evaluate its
effectiveness. After incorporation of instructor feedback, this milestone will be incorporated into your economic risk mitigation proposal. This milestone is graded with the Milestone Two Rubric.

Milestone Three: Implications of Government Fiscal and Monetary Policies on Firm’s Business (Section III)
In Module Seven, you will submit a 4–6 page paper identifying and analyzing the implications of your macroeconomic analysis on your chosen firm. Using the data analyzed in the context of Milestone
Two, predict the level of GDP growth, price inflation, and movements in interest rates that can be expected in the next five years. Assess implications on your firm of your macroeconomic analysis,
and identify factors, given the operational features of the firm and the operational

 

features of the industry to which the firm belongs, which you characterize as requiring planning for business contingencies. After incorporation of instructor feedback, this milestone will be
incorporated into your economic risk mitigation proposal. This milestone is graded with the Milestone Three Rubric.

Final Submission: Economic Risk Mitigation Proposal
In Module Nine, you will submit a 12–14 page comprehensive economic risk mitigation proposal. Your submission should be a polished artifact containing all of the critical elements of the final
project. Conclude your project with proposed strategies to mitigate systemic economic risk as outlined in Section IV. It should reflect the incorporation of feedback gained throughout the course.
This submission will be graded using the Final Project Rubric (below).

 

 

 

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