UEL ID: U0949606 Sem.

B 09/10

BACHELOR OF ARTS (HONS) IN ACCOUNTING & FINANCE

Researching in Accounting and Finance

FE 2040

Research Proposal

A Study on the Importance of Risk Management to an

Organization

1 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

Passport Number: G27978722

UEL ID: U0949606

List of Contents

ABSTRACT...........................................................................................2

4.2.1QUALITATIVE RESEARCH (EXPLORATORY) & QUANTITATIVE RESEARCH (DESCRIPTIVE)..................10

4.2.11 PURPOSE (EXPLORATORY & DESCRIPTIVE)...............................................................10
4.2.12 POPULATION & SAMPLE (EXPLORATORY & DESCRIPTIVE)..............................................11
4.2.13 PROCEDURE..................................................................................................11
4.5 REPORTING.......................................................................................................12
5.1 TIME..............................................................................................................13
5.2 FEES..............................................................................................................15

6.0 LIMITATIONS.................................................................................15

7.0 CONCLUSION................................................................................16

BIBLIOGRAPHY/ REFERENCES..............................................................16

APPENDIX A.......................................................................................19

APPENDIX B ......................................................................................21

Abstract

According to ISO 31000, risk is defined as the effect of uncertainty on objectives.

Therefore, risk management can be considered as to identify, assess, and prioritize

2 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

risks followed by coordinated and economical application of resources to minimize,

monitor, and control the probability and impact of unfortunate events or to maximize

the realization of opportunities. Risks examples are credit risk, trading risk, firm wide

risk, operational risk, global risk, etc.

[Wikipedia, 31- 3- 10]

This project seeks to find out the importance of risk management to organizations,

and the acceptance of risk management by companies. The main goal is to figure out

the realization of importance of risk management. This project will conduct surveys

on 300 organizations in different industry and different nation, and research

information will be collected through internet and also library, as well as experienced

professionals. The project’s achievements will be evaluated for the success of the

proposed objectives and timetable segments. The researcher expects that this

project will bring information to organizations and increase the acceptance of risk

management.

Proposal Title: A Study on The importance of risk management to an

organization.

1.0 Introduction

This research proposal will be prepared for study of the importance of risk

management to organizations; the researcher will plan the research carefully and

3 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

apply suitable methods to carry the project.

1.1 Objectives

The objectives of this research proposal are to find out the importance of risk

management to an organization, and also explore the related theories needed to be

known, and the advantages of risk management, and opportunities within risk

management.

This project is to figure out the advantages of risk management, possible research

areas include:

1) Risk management techniques, methods and risk management institutions

2) Responsibilities of a risk manager

3) Foreign Currency Exchange Risk

4) Optimization tools for risk management

5) Pricing and hedging techniques

6) Monte Carlo and quasi-Monte Carlo techniques

7) Types of Risks

8) Corporate risk management practices

1.2 Background

The idea of risk managements comes from Wilson Quarterly, the idea is been

summed up by Stephen Lagerfeld right after World War I. The idea is that if we know

how to measure probability and we know about risk management, it will make our life

more productive, more prudent and avoid unnecessary waste of resources. The

concept of risk management developed from 1990 until today.

4 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

Nowadays, the world is facing different kinds of risks, the economic crisis the

terroristic attack, lack of resources, the fluctuation of oil price, etc. And there are

multibillion-dollar credit losses, it has become increasingly important for companies

and banks even government leaders to understand and adapt risk management to

their field. Risk Management pioneers and discovers the latest monetary and

hedging techniques in use around the world, and presents the foundation for creating

an incorporated, steady, and effective risk management strategy.

2.0 Literature Review (Refer to Appendix A)

“Derivatives: Transfer of (insurance) risk by means of issuing derivative instruments

with a risk specific underlying. This transaction type may emphasize the transfer of

risk of risk financing.”

[Frenkel, Hommel, Dufey, Rudolf, p347, 2000, 2005]

The researcher agrees with the authors, this quotation gives a clear definition of

derivatives.

“A scenario analysis measures the changes in market value that would result if

market factors were changed from their current levels, in a particular, specified way.”

[Michael, Alan, Howarth, Dempster, p14, 2002]

The researcher agrees with this idea, but the way the author explained the term is

too complicated and professional, and they didn’t give a brief definition for this term.

“Trading Risk Management: this is a macro risk management at the level of individual

5 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

traders and trading desks. This Activity is focused on quantifying risk to changes in

risks factor and implementing specific hedges”

“Firm wide risk management: this is an aggregate risk management at the level of

trading desk, business and the firm itself. This activity is focused on matching risk

with capital to ensure the ability of the firm to absorb trading risk.”

[Satyajit Das, p4, 2006]

The author had given a clear definition and it is easy to understand these two

phrases through his writing.

“Coupon Curve Duration: measures the price sensitivity of mortgage-backed

securities to changes in interest rates”

[Golub, Tilman, p48, 2000]

The author failed to give to more specified definition for this term; it is hard to get the

full understanding of this phrase.

“Credit Risk is the risk of loss following a change in the factors that drive the credit

quality of an asset.”

“Market Risk is the risk of losses arising from changes in market risk factors.”

“Operational Risk refers to financial loss resulting from a host of potential operational

breakdowns that we can think of in terms of people risks, process risks and

technology risks.”

[Crouhy, Galai,Mark, p14, 2006]

The author had given examples to support his theory and the definition is

6 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

understandable.

“Risk: A condition in which there exists a possibility of deviation from a desired

outcome that is expected or hoped for.”

“Peril: A Peril creates the potential for loss”

“Hazard: A condition that may create or increase the chance of a loss arising from a

given peril.”

[Gallati, p8, p9, 2003]

The definition for risk is too professional; the author has to give examples to make it

easier to understand for non professionals.

“Balance of the Yin and the Yang: hard side (Yang) focuses on processes, systems

and reporting, the soft side (Yin) focuses on the people, skill, culture, values and

incentives.”

[James Lam, p22, 2003]

The researcher agrees with the author, however, the explanation can be more

specified.

“Risk Management Objectives

1) Escape severe losses to the company from insurable risks.

2) Costs and risk management are kept with reasonable bounds.

3) Constant progress in loss reduction is recorded.

4) Determine methods to be used to analyze new projects before financial

7 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

commitments.

5) Long term risk reduction and profit maximization plans to be developed and

periodic assessments of progress in fulfilling these plans be made.

6) Constant study of new exposures to effectively handle the potential risks.”

These are some evaluations of a manager’s performance.

[Greene, Serbein (1983) P79]

Through the reading, the researcher has a clear idea of the objectives of risk

management and the author has not specified how companies evaluate manager’s

performance.

3.0 Hypothesis

To carry this project, the researcher will start by asking a question: is there a

considerable market demand for risk management globally? The appearance of risk

management is to forecast and control the possible or insurable risks, and maintain

and maximize the company’s benefits. Reduce the impact of risks and make the

situation better off.

There are two possibilities to this hypothesis; the most possible one is that there is a

large demand for risk management. And if this prove to be wrong, the alternative

hypothesis will become true. So if it is proved to be wrong, the researcher may

8 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

assume that there is little demand in the market place for risk management.

4.0 Methodology

4.1 Research Design

This research proposal will be a descriptive one, for the aim of finding out the global

market demand level for risk management. It will be supported by exploratory

research. Descriptive research is commonly used and it is a statistical research

which is much suitable for this research.

This project will be in medium breadth, and will go deep into information concerning

practices. In order to understand more about certain areas and aspects of this

research, the researcher will use various methods to get a well mixture of breadth

and depth of information.

The researcher will use questionnaires to quickly collect interested information from a

group of companies, and then hold seminar to get more in-depth information from

certain respondent companies and professionals of the project issue. For further

depth of this research, the researcher will carry out case studies; it will contain more

in-depth analysis of unique and notable cases, for example those who benefited or

not from the risk management. And also the research will apply forecasting or

statistical and perhaps financial approaches to point out the importance of risk

management.

4.2 Data Collection Method

There are two types of data, qualitative and quantitative. The quantitative data will be

9 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management to

an Organization
UEL ID: U0949606 Sem. B 09/10

collected through e-mail and letter surveys, the researcher will use a cover letter and

enclose with the questionnaires to 300 companies from different industries and

different countries. The qualitative data will be gathered by library resources,

journals, publications, internet information, case studies, and in-depth interviews with

a group of professionals. All the data will be critically evaluated and strictly chosen,

then summarize, finally arrange in order, and logically presented by the researcher.

4.2.1Qualitative Research (Exploratory) & Quantitative Research (Descriptive)

4.2.11 Purpose (Exploratory & Descriptive)

The purpose of doing a qualitative research in this project is to explore the

advantages of risk management, and the researcher will provide the user with

detailed qualitative information. Focused research will be used to explore all the

background and theories related to this topic to support the quantitative research.

After doing the qualitative research, the researcher will carry out an e-mail and letter

study using questionnaires that will send to companies. These approaches had been

chosen by a reason of low cost and higher efficiency. The purpose of doing this is to

explore the number of firms that have already applied risk management to their

company, and the overall level of acceptance of risk management worldwide. And

also figure out the attitude of companies. It will be in large numbers to represent the

target population and predict the global trend of risk management.

10 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

4.2.12 Population & Sample (Exploratory & Descriptive)

The researcher will conduct 12 professionals who have more than 30 years

experiences in this particular field and these professionals will be have sufficient

knowledge and information regarding risk management. The reasons of choosing a

focus group of professionals are that they are more knowledgeable in this field, and

as they are coming from different countries, it will be a global view. They will be from

6 different countries. The sample will be chosen as follows:

Country China India America UK Australia Singapore

Number 2 2 2 2 2 2

The researcher will send letters and e-mail questionnaires to 300 companies; the

study area will cover 6 countries and 10 different industries. This will bring out a

quantitative data that will be useful to risk management institutions.

The sample will be selected as follows:

Country America U.K China India Australia Singapore

Number of 50 50 50 50 50 50

companie

s
Type of 30 30 30 30 30 30

industries

4.2.13 Procedure

The researcher will gather information from these 12 professionals through online

11 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

webcam meeting. They will be discussing this topic for two weeks to figure out the

global trend of risk management. The researcher will also get help from the library for

the books that can be used to do this research, and read these books to gather

useful information, make notes. And also the researcher will use other available

resources, then combined the useful information and present in a logical sequence.

The researcher will set up a list of questions relating to questions concerned in this

project and e-mail them with introduction of the research objectives to the companies

that selected at random. The respondent company will be in different size, large,

medium and small. And wait all the respondents to send back the questionnaires and

then arrange and analyze the data. Finally carry out the report.

4.4 Analysis

After collection of data, the researcher will conduct the analysis, the researcher will

use statistical analysis techniques to analyze the quantitative data, and the

techniques will be used are: standard deviation, correlation, trend analysis and

tabulation analysis. For qualitative data, the researcher will analyze the data

systematically and analyze the variables both independent and dependant. Combine

the analysis and then make a conclusion of how to achieve the project goals and the

constraints of achieving them. And finally lead to the solution of the research

question.

4.5 Reporting

After gathering and transfer all the data into useful information, the researcher will

12 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

write a complete and detailed report on this project, then carry a meeting with the

user of this report to find out the shortage and weakness of this report, make

arrangement accordingly, after approval of the project a power point presentation will

also be made by the researcher.

5.0 Budget/Time

5.1 Time

The following time table is strictly designed, and there will be over-lapping periods to

allow the most of the respondents to send back the questionnaires, and also for

rearrangements of the project report. There will be enough time for collecting and

summarizing the information.

13 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

Process Seven Months (Week)

1st
2 nd
5 rd
7th 16th 19th 22th 27th 29th 30th

- - - - - - -

4th 6th 15th 18th 21th 26th 28th

Research Design

Literature Review

Prepare Questionnaires

Seminar/Webcam Meeting

Improve

Questionnaires
Data Collection

Arrange & Summarize Data

Data Analysis

Write Report

Conduct client and make

improvements
Power Point Presentation

14 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

5.2 Fees

Budget Items Cost ($)

Expenses

Rents (Meeting Room) 800.00

Internet Charges 200.00

Printing Costs 250.00

Transportation 850.00

Telephone Charges 600.00

Water and Food (For Seminar) 500.00

Fees to Researcher 550.00

Research Assistants Salary—3 Person 900.00

Total Cost 4650.00

6.0 Limitations

The researcher found out that there are limitations in this project, the problems are:

the respondents may not answer the questionnaires carefully and honestly this will

lead to errors in the analysis process; and companies will chosen in random and the

group is small, so the reliability of the analysis cannot be guaranteed; different

15 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

industries may have different demand level for this subject. And the research apply

descriptive research which have a shortage that the research will not able to describe

what cause the situation and it can’t be used to get a causal relationship.

7.0 Conclusion

This project will be carrying out for risk management institutions and companies that

need information about risk management and the market situation for risk

management companies. The researcher will doing research on focused group, both

quantitative and qualitative researches will be arranged, data will be analyzed strictly

and the report will be reviewed by users and making further improvements according

to customer needs.

Total: 2193Words.

Bibliography/ References

Books:

Bennett W. Golub,Leo M. Tilman, (2000)

Risk Management: Approaches for fixed income market
John Wiley & Sons, Inc, ISBN 0 471 33211 9

Christopher L. Culp, (2001) The Risk Management Process: Business Strategy and

16 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

Tactics
John Wiley & Sons, Canada
ISBN 0 471 40554 X

Jacqueline Jeynes, (2002) Risk Management: 10 Principles

Biddles Ltd, Great Britain, ISBN 0 7506 5036 2

James Lam, (2003), Enterprise Risk Management: From Incentive to Controls

John Wiley & Sons, Inc ISBN 0 471 43000 5

M. A. H. Dempster,Michael Alan Howarth Dempster,(2002)

Risk Management: Value at risk and Beyond, Cambridge University Press
ISBN 0 521 78180 9

Michael Frenkel,Ulrich Hommel,Gunter Dufey,Markus Rudolf, 2nd Edition (2000,2005)

Risk Management: Challenge and Opportunity, Springer Berlin
ISBN 3 540 22682 6

Michel Crouhy, Dan Galai, Robert Mark (2001), Risk management

McGraw-Hill, ISBN 0071357319, 9780071357319

Michel Crouhy,Dan Galai,Robert Mark, (2006)

The Essentials of Risk Management, McGraw-Hill companies, Inc
ISBN 0 07 142966 2

Reto R. Gallati, (2003), Risk Management and Capital Adequacy

McGraw-Hill, ISBN 0 07 140763 4

Sergio Focardi,Caroline Jonas,Frank J. Fabozzi Associates (1998)

Risk Management: Framework, methods and practice
Frank J. Fabozzi Associates 1998
ISBN 1 883249 35 X

17 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

Satyajit Das, Risk Management, (2006)

John Wiley & Sons (Asia) Pte Ltd
ISBN13 978 0 470 82165 7

Websites:

http://www.managementhelp.org/research/analyze.htm

http://www.lums.lancs.ac.uk/phd/PhDproposal/

http://www.socialresearchmethods.net/tutorial/tutorial.htm

http://ic.daad.de/accra/download/How_to_write_a_research_proposal.pdf

http://www.users.drew.edu/sjamieso/Resources/Proposal.pdf

http://researchproposalguide.com/

http://www.richmond.gov.uk/research_proposal_guide.pdf

http://portal.surrey.ac.uk/portal/page?
_pageid=823,181134&_dad=portal&_schema=PORTAL

http://insight.aon.com/?elqPURLPage=3907

http://www.knovel.com/web/portal/browse/display?
_EXT_KNOVEL_DISPLAY_bookid=1263

http://www.experiment-resources.com/how-to-write-a-hypothesis.html

http://www.cvgs.k12.va.us/research/PAPER/defining/research_hypothesis.htm

http://www.nmmu.ac.za/robert/reshypoth.htm

http://www.experiment-resources.com/research-hypothesis.html

http://www.accessexcellence.org/LC/TL/filson/writhypo.php

http://www.accessexcellence.org/LC/TL/filson/formathypo.php

http://www.managementhelp.org/research/planning.htm

18 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

Appendix A

Summary of Literature Review

The aim of this section is to gather information and knowledge related to the topic,

the terms, definition, objectives and other important elements for risk management

that managers and companies and also institutions need to be mastered.

Through data collection and literature review, the researcher put the important

elements into category as below:

It is better for companies, individuals and also institutions to be familiar with the

19 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

following information:

1. Knowledge of the objectives of risk management.

2. The background and recent reputation and position of risk management.

3. Global Risk Management Institutions.

4. The types and origin of risks.

 Trading Risk

 Credit Risk

 International Risk

 Market Risk

 Political Risk

 Management Risk

 Historical Risk

5. Techniques to measure and control risks.

Capital Asset Pricing Model (CAPM)

 Standard Deviation

 Correlation

 Variance

 Expected Return

 Coefficient of Variation (CV)

6. Risks in different fields, and risk management services and products.

7. Advantages of adapting risk management, cases of companies or government

department applied risk management to reduce risk and maintain benefit.

8. Risk Management Process

9. Risk Transfer

20 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization
UEL ID: U0949606 Sem. B 09/10

 Hedging

 Insuring

 Diversifying

10. Valuation of Assets

Appendix B

Draft Questionnaires
Designing of Questionnaires

The questionnaires will be designed to gather data on 300 companies; the questions’

format will both close and open the script questions are as follow:

1. Did your company apply risk management or not?

2. Do you know anything about risk management?

3. How do you value risk management?

4. Do you think it will make your company much better if you adopt this section into

your company?

5. What are your expectations of risk management?

6. Will you adopt risk management to your organization in the future?

7. What do you think about risk management?

21 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management
to an Organization
UEL ID: U0949606 Sem. B 09/10

8. What is your company’s main goal?

9. What is your product?

10. Have your company ever face risks?

11. What would you comment on your company’s management?

12. Does your company have international business?

13. Can you give a brief summary of your company’s five year performance?

14. What is your company’s long term strategy?

15. Do you know the current global economy situation?

22 / 22 FE2040 Research Proposal: A Study on The Importance of Risk Management

to an Organization