Discuss about the Holistic View Of Genworth Insurance Limited Of Australia.
Since the very outset of business, there have been two things which have been closely associated with it, one risk and the other management. These two have been long connected with business and would continue to be so in the future too. As a result of which, these two factors demand a greater deal of attention from various components of any business organisation. Risk is closely associated with each and every activity which emanates from business. In fact the very environment of which the business is the part of, is dynamic in nature, which keeps on changing, which causes a huge amount of risk for any company. Similarly, every business organisation needs a proper path to tread on. This road is paved with the help of different laws, rules and regulations, created and implemented by the management of any organisation. Through this report, a thorough analysis of the risk management procedures and the ground implementation of the governance rules by Genworth Mortgage Insurance Corporation.
A company or business organisation is formed with the primary objective of earning profits through the production and sale of goods and services. Profit making occupies the inherent part of any business. It involves bringing together of diverse group of people as a result of which, a common law should be present to govern the company and its employees. A common law must be present which would assist in preventing and mitigating the conflict of interests which might arise in the course of the operations of the company.
There are a variety of laws which are advocated by Australian Securities Exchange, with the aim of assisting in the management of the company and its group of people. These governance laws and rules are very important for any company’s smooth working. Every Australian company, big or small or operating in a different kind of industry all together, is expected to abide by these principles. The principles laid down by ASX are as follows:
Principles |
Meaning |
Principle 1 |
Proper identification and recognition of the roles of the board members. |
Principle 2 |
Presence of adequate size, aptitude and obligation of the board, for proper implementation of responsibilities. |
Principle 3 |
Application and implementation of decision making by following ethical standards and principles. |
Principle 4 |
All organisation must have a proper and impartial structure, which would help in protecting the interests of the financial reports of the company. |
Principle 5 |
It is very important to always promote a punctual and proper disclosure of the important information about the company. |
Principle 6 |
A fool proof and solid communication system should be activated by company in order to maintain a cordial relationship with the shareholders. |
Principle 7 |
Each company should have a risk management system in place to address the risk issues faced by the company. |
Principle 8 |
The company should ensure that there is a clear remuneration policy for its employees and members. |
Genworth, being one of the leading insurance company in Australia, ensures that each and every principle of ASX is followed:
Genworth’s risk and capital management framework consists of an aggregate of people, policies, and procedures for the identification, measurement, monitoring and the necessary controlling of all the components of material risks (Forbes welcome, 2018). As a result of which a robust risk framework has been developed to address the risk issues. This risk framework is primarily responsible for over-seeing this framework’s implantation.
Genworth‘s senior management along with the board of directors of the company provide relative weightage to the risks faced by the company. As a result of which, the company has rightly decided to address the risk and reduce their impact upon the workings of the company (Genworth, 2018). The risk management group have therefore identified certain important components of the risks faced by the company. Application of these components would go a long way in mitigating the risks faced by the company.
Common size income statement of Genworth for the year 2016 and 2017:
Gross written income is one of the most significant sources of income for any insurance company. The company has seen a dip in this income of $ 12, 947 million. This could have far reaching consequences for the company as the total comprehensive income for the Genworth has also considerable decreased. The auditor must bring this issue in the notice of the senior management of genworth at the earliest. It is because of this reason, there have a series of impact on a string items such as insurance profit, profit of the company and the net interest of the company. Genworth has been pretty straight forward in its preparation of financial statements and has reportedly the matters in a straight forward manner. It has not resorted to window dressing in this regard.
Common size balance sheet for the year ended 31st march 2016 and 2017:
Computation of balance sheet ratios:
The company’s balance sheet has also reflected the impact of the decrease in the gross written income of 2017. The decrease has also led to a substantial decrease in the cash and accrued investment income of the company. The cash has decreased by $14,618 million in 2017 from its erstwhile in 2016. The company has also tried to decrease this impact by increasing its debtors or trade receivables, in order to ensure better short term liquidity. The company has also increased its investment in fixed assets such as plant and machinery by $ 466 million. This is a welcoming thing. The auditor must be careful while looking into the balance sheet of the company as the chances of concealment of material information of important nature could take place.
The current ratio of the company is also at 0.39 shows, it has decreased from 2016, which means that the company might have a problem in paying off its obligations in the short run. An ideal current ratio for any company should be within 1 to 1.2, this ratio never satisfies this criteria, which is a serious issue and must be addressed (Candor-holdings.com, 2018). The quick ratio is an apt indicator of a company’s short term liquidity. It says that the company has enough assets which can be converted into liquid cash at a very short notice. If it increases, then it is a welcoming note for the company. In case of Genworth, it has dipped by .02, which is not a minuscule issue for one of Australia’s prominent insurance companies. The company has also improved by .1 and a higher one indicates a greater dependence on debt funds, which is not welcoming for the company.
Conclusion:
This report has been made in order to provide a robust and comprehensive view of the implementation of governance principles and analysis of various kinds of risks faced by an insurance company like Genworth (Limited, 2018). The report provides a bird’s eye view of the entire process followed by Genworth in its implementation of the rules of governance as advocated by the Australian Securities Exchange. Along with this, the culture of risk administration followed in Genworth has also been inspected and analysed.
References:
Candor-holdings.com. (2018). [online] Available at: https://www.candor-holdings.com/equities/wp-content/uploads/sites/2/2016/02/types_of_financial_ratios_19mar_2012.pdf [Accessed 29 Apr. 2018].
Cardona, O.D., 2013. The need for rethinking the concepts of vulnerability and risk from a holistic perspective: a necessary review and criticism for effective risk management. In Mapping vulnerability (pp. 56-70). Routledge.
Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.
Forbes.com. (2018). Forbes Welcome. [online] Available at: https://www.forbes.com/sites/mikepatton/2014/11/30/everyone-needs-risk-management/#aba32e0729f1 [Accessed 29 Apr. 2018].
Investor.genworth.com.au. (2018). Genworth – Investor Centre. [online] Available at: https://investor.genworth.com.au/Investor-Centre/?page=reports-and-presentations [Accessed 29 Apr. 2018].
Limited, G. (2018). Genworth Mortgage Insurance Australia Limited: Private Company Information – Bloomberg. [online] Bloomberg.com. Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=262493228 [Accessed 29 Apr. 2018].
Member.afraccess.com. (2018). [online] Available at: https://member.afraccess.com/media?id=CMN://2A1067777&filename=20180228/GMA_01956212.pdf [Accessed 29 Apr. 2018].
Mwangi, M. and Murigu, J.W., 2015. The determinants of financial performance in general insurance companies in Kenya. European Scientific Journal, ESJ, 11(1).
Sweeting, P., 2017. Financial enterprise risk management. Cambridge University Press.
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