Establishing Possible Risks for the Money Cares Investment Corporation
Money Cares has fiduciary responsibility since it is an investment corporation. It also has the responsibility of safeguarding its investors’ money. Money Cares Investment Corporation is experiencing too much overspending. The overspending is due to unplanned expenditures by investment specialists and it can lead to misuse of investors’ funds.
It is evident that the policies that make employees accountable for the expenses are not in practice. There are no policies to monitor how the employees use business credit cards. It shows that if an employee incurs a particular expense, the company reimburses it. The reckless expenditures can cause Money Cares Investment Corporation’s bankruptcy.
One major thing that might go wrong for an investment corporation is that target customers may start using the substitute product. It would be due to its cheap price or team implosion.
Every investment corporation has risks that it faces (United States. Congress. Senate. Committee on Banking, Housing and Urban Affairs. Subcommittee on Securities, Insurance and Investments, 2013). An investment corporation like Money Cares faces the following risks in the marketplace. Market risk, also referred to as systematic risk, is the risk that an investment corporation faces in the investment market.
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Money Cares Investment Corporation can face liquidity risk. It occurs due to the inability to sell or buy investments in the open market. It can also occur if investors are unable to sell or buy investments at a reasonable price. Small-cap stocks and over-the-counter markets make investors prone to liquidity risk. This kind of risk happens in cases when there is low demand for the investment.
Another type of risk that Money Cares Investment Corporation is likely to run is company risk. This type of risk occurs when a corporation struggles to maintain positive revenue. It also occurs when corporations make bad business decision or produce goods that do not satisfy customers. It is difficult to assess the company risk since a corporation can hide negative situations inside the corporation’s operations.
Money Cares Investment Corporation could be taking credit risk that is a form of non-systematic risk. Due to the employees’ overspending nature, it may be unable to pay its investors or for the investment contracts like fixed annuities.
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Also, Money Cares Investment Corporation is exposed to political risk. Tax increases or government regulation are examples of political risk. It leads to great distortions of the international markets, making free enterprise less favorable. The above are major risks that Money Cares may be taking.
Other types of risks that the company may be running are interest rate risk, economic risk, currency risk and inflation risk. Each and every investment has its risk combination. For the investors investing in Money Cares Investment Corporation, it is important to understand the risk before they hand in their money for investment. Other than the risks mentioned, there can also be other risks depending on the kind of investment.
To succeed, Money Cares Investment Corporation should highly invest in its employees. To retain the employees, they should be given possibilities for professional development. It makes employees stick to the organization. Other than training them in computer programs, employees should be trained in the following areas: sales and marketing, team-building, customer care, project management, leadership development and time management. Training will raise the corporation’s profit margin (Badore et al., 2012).
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When a corporation invests in its employees, it saves money. Not only does it save money but helps cut the cost of replacing employees. When employees stay long in a corporation, they are happier and can serve customers better. It pays off by higher profits of the corporation.
Also, the corporation should come up with policies that would help reduce the level of overspending. Money Cares Investment Corporation may decide to only purchase equipment after replenishing it. Also, it can set up a department to control what each employee spends his credit card money on.
Money Cares Investment Corporation’s most vulnerable areas are in its earnings. The first quarter earnings should give a good clue of the expected earnings. If the payout ratio is high, then the risk will be higher. In return, investors should be careful about the measure of profits that they use when calculating the proper percentage, notes (Bird, Cahoy, & Prenkert, 2014). Money Cares is also vulnerable to debts.
Major sources of assets for Money Cares Investment Corporation are its few employees. The Investment Corporation has six employees that are CEOs, a manager, financier, three investment specialists, and two clerical assistants. The Corporation relies on modern technology that makes it easy to carry out its procedures. In this Corporation, decisions are made and taken whenever an issue arises. The risk profile of this corporation is very low. Thus, it is worth noting that the best asset is its goodwill and trust from its customers, notes (Government of Canada, 2013).
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Money Cares spends most of its money on expenses. In the corporation, they spend too much money on transportation, marketing supplies, and workshop items that include hospitality items such as drinks and food meant for customers. It is evident that Money Cares Investment Corporation does not spend money on promotions and investment aspects. The Corporation should strive to allocate most of its money for sales and advertising to increase the number of customers.
Also, it should come up with policies that can help cut the on-going unplanned employees’ spending. Money Cares Investment Corporation should cut down the cost of operations. In this corporation, the cost of operations exceeds profit generated from operations and the capital investment. It shows that spendings are greater than revenues; as a result, the Corporation is operating on losses.
In order to regulate its budget activities, Money Cares Investment Corporation should be strict about its financial control measures that are its performance, audit, and budgets. In this case, audit includes efficiency audit to determine how efficient the corporation is in carrying out its activities. Another form of audit would be frequent control of cost. It would help track the corporation’s expenditure. In any corporation, managing the cost of operations becomes the weakest part. In this case, the most appropriate measures should be applied periodically.
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Money Cares Investment Corporation ought to safeguard the interest of shareholders by increasing the capital investment (the net worth of the corporation). This issue calls for periodic market and costs appraisal. Money Cares should perform audits regularly to check what is happening on the ground. According to Ministerio de Hacienda y Administraciones Públicas (2011), through auditing, a corporation safeguards the shareholder’s interest. Simulation method can help in finding out and estimating cost potential of cost overrun. It would also help in establishing the risk of cost overruns that is a major risk in any corporation.
Internal audit would also help Money Cares Investment Corporation in identifying risk management areas. Through auditing process, both operational and strategic problems would be uncovered. If auditing is used to regulate budgets, then an external professional should carry out the entire auditing procedure to uncover inefficiencies in the corporation’s system of operation.
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The auditing process is also the best way of identifying risks since it involves both the quantitative and qualitative techniques. In return, it will trigger an action plan. This plan will help in bringing forward the ways of managing and handling risks, and minimizing costs. All the above mentioned ways would be the best solutions that Money Cares Investment Corporation can apply to regulate its budget.