For this phase of the course project, you will conduct additional research for the bank you chose as the subject of your project. Write the next section of your risk management plan in which you discuss the key people responsible for mitigating risk at the bank. Be sure to include corporate governance, the impact of the Sarbanes-Oxley Act, and asset-liability management in your discussion.In this paper, please address the following questions:Who are the members of the board of directors and what is the significance of their role at the bank?Who are the members of the executive committee or team, specifically the President, CEO, and CFO and what are their responsibilities? What makes them qualified for their positions?How has the Sarbanes-Oxley Act and other legislation impacted financial reporting for the bank?How is asset-liability management handled at the bank and by whom? Be sure to include a brief description of how risks to liquidity, interest rates, currency, funding of capital projects, and planning for profit and growth are mitigated.RequirementsBecause this is part of a project, this section of the paper does not need an introduction.Because your paper is required to be 2 pages, you should use subject headings to label your paper as appropriate.Keep in mind that this is a research paper; and, as such, should be informed by your research articles.Be sure to include APA citations to support your assertions and to inform your paper.You will need to include a reference page with this section of the paper.Be sure to proofread your paper to ensure that is free from all grammar and spelling errors.i have already completed part 1 and 2. please see attach file before starting
wells_fargo_part_2.docx
well_fargo_bank_1.doc
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Running Head: THE WELLS FARGO BANK
1
Introduction
The Wells Fargo Bank is an American based institution that specializes in the provision
of financial services, credit card, and insurance as well as global banking. All the same, the entity
has its headquarters in San Francisco with its other branches widely distributed over the US. Into
the bargain, the organization is known to have the largest market capitalization despite being the
third largest in the entire country regarding their assets (Acharya, Almeida, & Campello, 2013).
This article looks extensively into the bank to identify the risks undertaken as well as their terms
of operation besides the capitalization and solvency measures.
In like manner, the entity is in collaboration with large corporations in the nation, and
they are known to employ a consultative approach in the course of their activities. Strikingly,
consultation is vital in the acquisition of quantifiable results, integrity as well as ample
knowledge on the trends in the market. However, the management has to deal with the adverse
effects of economic changes such as housing and employment in the country. Furthermore, the
operational risk taken into account is that they do not give loss provisions due to the instances of
unemployment as well as unfavorable home prices. The compliance risks associated with this
firm as well as others in the field are poor quality loan portfolio. All the same, the hazard is
brought about by the slow and uneven economic recovery resulted in shutting down by the state
as well as fiscal policies hence a problem to future growth (Wells Fargo Commercial Financing
Services, 2016).
Supernumerary, the risk types involved in the entity are inclusive of credit, operational
and market risks and are brought about by unpredictable shifts in the financial market as well as
THE WELLS FARGO BANK
2
the economy. Other types of risk that command a minimal percentage in the entity are liquidity
and reputational risks. It is also important to note that the system of operation, as well as morals
in the entity, are also risks. The risk trends experienced in the past are inclusive of cyber security,
pacing with regulatory deadlines, and vendor management concerning the contract with their
third parties (Claessens, Ghosh, & Mihet, 2013.
Moreover, risk mitigation is taking precautionary measures to reduce adverse effects of
risks. For the reason mentioned, the institute tries to keep a balance between taking risks and
offering rewards. The risk mitigation strategies in the selected entity are risk limitation,
avoidance, and acceptance as well as the transfer (Claessens, Ghosh, & Mihet, 2013). The Wells
Fargo offers credit in consideration of the credit reports which entails one’s capacity, capital,
economic condition as well as collateral values to minimize future risks associated with credit
giving.
What is more intriguing is that the bank is a responsible and fair lender. Discrimination of
any sort such as age and race is strictly forbidden in the entity. Rather, the primary goal of the
bank is to give a clear understanding of their loan terms to their clients hence promoting an
informed borrowing from their customers (Fair and Responsible Home Lending, 2016). In
aggregate, inadequate capital limits a bank’s growth rate. All the same, the Wells Fargo
institution is known to be among the best-capitalized banks in America. As a matter of fact, it is
the only large bank beside the Bank of America that does not run short of its capital. The chances
for the solvency of the bank are very high as it is not prone to any future capital degradation
(Mukherjee, Korah, Bhatt, & Krishnamoorthy, 2014).
THE WELLS FARGO BANK
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Reference
Fair and Responsible Home Lending – Steps Forward Program for Homeownership – Wells
Fargo. (2016). Wellsfargo.com. Retrieved 21 August 2016, from
https://www.wellsfargo.com/mortgage/steps-forward/fair-and-responsible-lending/
Wells Fargo Commercial – Commercial Financing Services. (2016). Wellsfargo.com. Retrieved
21 August 2016, from https://www.wellsfargo.com/com/
Mukherjee, A. K., Korah, S. C., Bhatt, S. R., & Krishnamoorthy, S. (2014). U.S. Patent
Application No. 14/166,033.
Claessens, S., Ghosh, S. R., & Mihet, R. (2013). Macro-prudential policies to mitigate financial
system vulnerabilities. Journal of International Money and Finance, 39, 153-185.
Acharya, V. V., Almeida, H., & Campello, M. (2013). Aggregate risk and the choice between
cash and lines of credit. The Journal of Finance, 68(5), 2059-2116.
Running head: WELLS FARGO BANKING RISKS
1
Wells Fargo Banking Risks
People-Related Risks
People-related risks are usually challenging to quantify and manage. For Wells Fargo,
such risks involve managing over-exuberant managers’ behaviors, workplace bullying,
absenteeism, general health and safety, fraud, compliance and regulation, misconduct, change
resistance, among other misconducts (Ledwidge, 2007). To manage such risks, there is need for
suitable foresight, planning, proper governance, and engagement. The human resource can set
and enforce stringent policies through the staff handbook. This will create a tone of the
organization. Similarly, the managers must be proactive and engaging to ensure employees do
the right thing at the right time. Performance management and appraisals can also assist in
mitigating such risks.
Financial Risks
These risks are related to company’s finances and financial transactions. For Wells Fargo,
the huge bank loans can be at risk of payment default during bad economic times. Uncertainty
regarding investment rate of return, as well as finical losses are some of the financial risks the
bank takes daily (Lambin, 2007). Similarly, financial reporting, interest rates, asset losses,
changing financial market, foreign investment risks, goodwill and amortization, currency value,
stock market fluctuations, credit risks, commodity risks, and liquidity risks are a major concern
to the bank. Stringent internal and external audits can assist deal with such financial threats (Liu,
2014). The company can opt to use a strong financial system to stem determine any malpractices
or manipulations of financial records.
WELLS FARGO BANKING RISKS
2
Operational Risks
It refers to the risks that result due to breakdown of internal processes, systems, people,
and procedures (Hopkin, 2014). They affect the bank’s ability to implement their strategic plans.
Each day the bank faces such risks as information system insecurity, privacy protection, fraud,
bank robberies, legal risks, environmental risks, and physical risks like infrastructure shutdown.
Some other operational risks include cost overrun, lack of operational controls, supply chain
issues, and poor operational capacity management (Sadgrove, 2016). The operational risks affect
the company’s reputation, shareholders’ value, and customer satisfaction while exposing the
business to great volatility. They are most revenue driven as opposed to being willingly incurred
(Ledwidge, 2007). They are also not diversifiable besides, they cannot be laid off since
processes, people, and systems are not perfect thus, the operational risks cannot be fully
eliminated. The company can however manage them to ensure risk levels are tolerable. Lastly;
with increasing globalization, the Internet, and social media use the management have sought to
implement suitable operational risk management (Liu, 2014). The company can conduct regular
assessment or audits through the internal audit department and external consultants to monitor
and mitigate all its operational risks.
WELLS FARGO BANKING RISKS
3
References
Hopkin, P. (2014). Fundamentals of risk management: understanding, evaluating and
implementing effective risk management. Kogan Page Publishers.
Lambin, J. J., Chumpitaz, R., & Schuiling, I. (2007). Market-driven management: strategic and
operational marketing. Palgrave Macmillan.
Ledwidge, J. (2007). Corporate social responsibility: the risks and opportunities for HR:
Integrating human and social values into the strategic and operational fabric. Human
resource management international digest,15 (6), 27-30.
Liu, S., & Wang, L. (2014). Understanding the impact of risks on performance in internal and
outsourced information technology projects: The role of strategic
importance. International Journal of Project Management,32(8), 1494-1510.
Sadgrove, K. (2016). The complete guide to business risk management. Routledge.
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