Risk Management Case about Wellfleet Bank
4) What is your decision regarding the GGC Business Credit Proposal?
The GGC Business Credit Proposal has the following pros:
• The company has well-diversified business across the world to mitigate risks
regarding social economic and political changes;
• The bank will earn from commissions and operation-related expenses;
• The gold price lately has been rising due to the financial downturn in markets, vague
future of investments and a rise in demand for electronics that consists of gold;
• A loan to a gold producer is considerable as risk-hedging since during an economic
downturn gold prices rise.
At the same time, the Proposal has few downsides:
• The Bank has to set aside reserves for default – an amount of capital that would be
commensurate to the credit risk involved in the deals;
• The gold price lately has not raised so fast as it was forecasted.
All thing considered, there are more and powerful pros than cons, therefore I would suggest approving the Proposal.…
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