The Role of VaR in Enterprise Risk Management Essay

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The Role of VaR in Enterprise Risk Management

The
role of VaR in Enterprise Risk Management: (Note: There is an excel
template attached that should be analyzed for this case study)

Mr.
White is the CFO of a $46 million revenue service company and has
excess cash funds to invest into a specific stock. Based upon his
research, he has found that Starbucks is an excellent choice for several
reasons, including a current stock beta of .64 (which means that the
risk is low as it is below a threshold of 1.00). However, he wishes to
use the VaR calculation to quantify the upside and downside risk to the
company to help him recognize if Starbucks stock is a good choice.
Please see below for the assignment parameters.

  1. Please visit the link below to gain a greater grasp of VaR and its application to risk. http://www.investopedia.com/articles/04/092904.asp?lgl=rira-baseline-vertical
      1. Also, see: http://investexcel.net/value-at-risk-methods-spreadsheets/
      2. And, https://www.investopedia.com/ask/answers/033115/how-can-you-calculate-value-risk-var-excel.asp

2.
Based upon the findings in the spreadsheet attached, please use Word to answer:

a. What
are your findings of Starbucks VaR benchmarks and what do they mean?

b. Please explain what you would advise Mr. White to do in terms
of his choice of Starbucks investment for the company.

c. What should he
explain to the CEO as to possible risk impact on the company?

Details

  • Apply critical thinking and the learning from the major objectives of this week’s material.
  • Formal writing and all APA formats
    are required. (In 3 -5 pages not including title page, in-text
    citations and reference page. Please use an introduction, conclusion and
    headings
    ) (See: Purdue OWL APA writing guidelines)
  • You MUST include a minimum of one
    quality SPC online library source to support your ideas as well as your
    textbook. Also, be sure to cite your textbook within your work and in the reference page.
  • Submit a MS Word document (*.docx).

-Textbook Attached – Chapter 24 (pg 489-501)

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