A Decision of Uncertainty, Research Paper Example

Abstract

The state of accountability over the United Kingdom financial regulated activities has reached the majority of global backdrop that coupled with shareholder expectations and interdepartmental agency pressures in which the state of affairs were to create a ‘perfect storm’ with the financial insurers. In examining the quandary factors that did not include the framework of financial risk functioning structure, including with the transparency, quality control, accuracy, and relevance of reported data of the costs associated with the existing evolving products and consolidation financial services. The objectives for the UK financial services are the valued-oriented, efficiently-oriented, and the principal-oriented, in which analyzed the possible solutions for the global external stakeholders to gain their confidence into the financial industry. The solutions is elaborated in detail as part of the recommendation for the UK financial services to remain objective throughout the financial initiative programs for the betterment of the financial health of the company.

Introduction

The state of accountability over the United Kingdom financial regulated activities has reached the majority of global backdrop that coupled with shareholder expectations and interdepartmental agency pressures in which the state of affairs were to create a ‘perfect storm’ with the financial insurers. In turn, these complexities of business finance regulation of Sarbanes-Oxley 404 act and Basel II for banks requirements were not in the objectives of use, in terms of, a financial initiative(s) in which the financial risk managers should have aimed for two objectives (compliance and performance) into an exercise practice derived from the two major existing banking accountability regulations. While, the financial institutions faced with this serious risk management functioning problems it created a considerable inefficiency, resentment, and skewness in the interdepartmental financial agency and operating units. And, worse, the probability for the ball to drop between two risk management stools (The Banker, 2007).

Problem Statement

What can the global financial institutions to retrench the risks of finance management and incorporate the financial initiative objectives into practice? In examining the quandary factors that did not include the framework of risk functioning structure, not excluding the transparency, quality control, accuracy, and of the costs associated with the existing evolving products and consolidation financial services (Journal of Banking and Finance, 2007). In addition, the UK financial services have inquired on the additional cost burden on regulated firms that is significant to the effect of enterprise risk. An independent report for the UK Financial Services Authority found that, on average, the incremental cost of regulation amounted to some 1.6% of non-regulatory operating costs. A study by AMR Research in 2005, Splurging in an Age of Compliance, predicted the cost over the next five years would hit $80bn (58bn) and the study put spending on Sarbanes-Oxley compliance alone in 2006 at $6bn, with compliance-related IT spending rising to $2bn.  This is without an incremental cost of regulation for the Basel II for banks of their associated non-regulatory operating costs (Journal of Business and Economics, 2007).

Methodology

The methods used in analyzing the risks of the financial problems is utilized by the statistical probabilities exploring for the ways in which these methods may prevent the risks of potential incremental costs for implementating the compliance under the regulating body and financial risk management performance. The two statistical probabilities used on here to describe how it is applicable to the problem in question, which these are: classic probability and empirical probability, and a brief probability and risk taking. To take into perspective, a classic probability refers to the uses of sample spaces to determine the numerical probability that an event will happen. The formula for classical probability of any event is calculated by the numbers of outcomes divided by the total numbers of outcomes in the sample as denoted, P(E) =  . For instance, forecasting the driving costs for investing the compliance (i.e., value-oriented, efficiently-oriented principal-oriented reviews on reporting protocols) is at least 16bn in a year, in which the probability by due chance is between 16% or 11.6%  in the next five years, respectively. Another statistical probability method is the empirical probability in which refers to a subjective (actual) experience that would determine the likelihood of outcomes. For this financial problems involving risks it is likely that the three objectives have the agreement with the global member stakeholders in oppose to the global external stakeholders. The formula used as denoted, P (E) =  , where P is the probability with the parenthesis E is the events that corresponds to the f, which indicates that the frequency for the half of the population is being divided by the total frequencies in the total population (Bluman, 2008). For instance, the empirical probability by due chance is that 3,000 global member stakeholders are in favored with the anticipated financial initiatives, whereas the 5,000 global external stakeholders are in opposed with the anticipated financial initiatives. This concluded that these populations have actually experienced the setback and expected that the outcome to come into the terms where there is a sign of a quality in the retrenchment risk management process.

Results and Recommendations

Thus, as a result, the empirical probability for the compliance planning along with the reporting quality are by due chance is approximately by 2,000 or 2%. The decision on the uncertainty implies to the course of action based on probability, that is in which , the true probability between the compliance and the performance of how the UK financial services to adopt the orientation in three disproportioned areas that represents the values, principals, and the effectiveness on the reporting process to the member stakeholders and even the external stakeholders by taking the classic probability of 16%, whichever is greater, as with the set of international financial reporting standards (IFRS) and the maintenance with the updating figures and financial statements and to show the commitment to the continuous improvement program by including its staff performance .Thus, a recommendation for the UK financial services is to take into account that the oriented objectives are mutually exclusive events to take the course in action in order for the clear understanding between the parties involved in the risk management process and to offset the overhead costs for the financial initiatives.

References

Bluman, A (2008) Elementary Statistics: A Step-by-Step Approach-A Brief version, 4^th ed. Special supplement: Risk management – A single view of risk and return – financial firms need to establish A single view of risk and return in their organisations, A view aligned with business needs, that meets external requirements, and that is positione. (2007). The Banker,  1-1. Retrieved from  http://search.proquest.com/docview/225624745?accountid=27965; Excerpts included the Journal of Business and economics (2007); Journal of  Banking and Finance (2007).