This report aims to evaluate existing risks of National Australia Bank including strategic risk, interest rate risk, market risk, credit risk, credit portfolio risk, liquidity risk and foreign exchange risk and make some recommendations to where can be improved by making comparisons with other big three banks in Australia (Commonwealth Bank, ANZ and Westpac). By assessing our Group’s risk profile, it can be concluded that our strategic risk and interest rate risk are almost the same as the other three banks because of the general economic condition. Our market risk is much lower than any other three banks by using VaR at 99% confidence level, but it does not mean that we have more confidence to avoid this risk, we still need attention and measure our market risk along with another method. The Group’s credit risk is lower than the other three banks but still high in terms of financial data which means that we should take actions to try our best to reduce our amount of irredeemable loans. In terms of liquidity risk, our Group experienced the danger of illiquidity in the year 2014 which should be paid much attention to liquidity risk. Finally, due to our financial business activities overseas, we are suffering from foreign exchange risk which is same as the other three banks. Last but not least, other risks which include insurance risk, operational risk, compliance risk and reputational risk are not discussed in this report but still need to be noticed. Strategic risk is the possibility of financial loss arising from changes in the business financial, social or management strategy, both internal and external factors can significantly prevent organizations from achieving their strategic goals. Through our annual report in the year 2017, we should recognize that it is possible for our Group to conduct incorrect strategy and we may not react very quickly to cope with such condition. (NAB Annual Report, 2017). Our group has been seeking an opportunity that can improve our financial performance as well as a social influence for a long time, however, it may change our Group’s risk profile and capital structure and inevitably come with reputational and financial risks.
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