Financial Annual 10k Report
This report mainly outlines the content of three sections on the annual 10k report; that is. ITEM 1A, ITEM 7, and ITEM 7A. And it focuses on three institutions; that is, Twitter, Truist Financial, and Teleflex. What is more, the primary focus of this discussion is the management of various organizational risks while implementing foreign currency derivatives and interest futures by carrying out a comparison of a wide range of risk management initiatives in the real world.
Truist Financial
With its main headquarters in Charlotte, North Carolina, Truist Financial is a banking institution. The company conducts business operational activities through its subsidiary Truist Bank and other multiple non-banking subsidiaries. Truist ensures a vast range of trust and banking services for commercial organizations and customers within specific geographic markets; that is, small and medium-sized companies and large corporations. These services are offered through over two thousand physical offices and a digital platform. Truist Financial institution provides a wide range of services; to be more precise, wealth and asset management through private banking, international investment bank services, small and medium-sized business lending, mortgage warehouse, and automobile and student lending, to name a few. To ensure success, Truist conducts a wide range of risk management initiatives.
Foreign Currency Risks and Interest rate risks
Variance in the interest rates could have significant impacts on the balance sheets of Truist; that is, expenditure, revenue, cash flow, and sustainability of capital. Also, the constantly changing foreign currency conditions, competition, and regulatory policies affect the expense of interest. Therefore, when interest rates go up, then expenditure relatively rises higher than the asset yields. In the long run, it leads to the reduction of the net interest margin. Due to the firm’s large economies of scale, the firm continually implements currency derivatives. By minimizing foreign currency and interest risks, the financial company implements strategies objectives, which ensure that the operational framework is consistent with the profitability and satisfaction of consumers’ needs.
The objective of risk management
Risk management serves the purpose of controlling interest rates, thereby maintaining revenue and expenditure of Truist within the most appropriate product levels. Another objective of risk management is to manage, regional, and local economic factors, competitive threats to ensure they do not have adverse effects on interest rates. Fiscal policies and regulations could affect productivity if they do not favor the institution’s objectives. Therefore, implementing an effective risk management initiative ensures profitability is maintained through precise policies. That aside, another goal of managing risk by the Truist administration is eliminating potential financial loss, boost and maintain stakeholder confidence, support and develop human capital in line with the institutional projections, and both local and international consumer expectations.
Foreign Currency derivatives
Truist utilizes currency derivatives for currency swaps, forwards, options, and future to minimize currency risk. In other words, they limit cash flow variations, which would otherwise prevent investment into development opportunities with high productivity potential. Also, Truist has an extensive foreign exchange rate; as a result, there is potential exposure to foreign currency risk, which results from international business activities, international competitors, and external debt. All in all, these derivatives recommend that economies of scale in expenses are vital determinants of currency derivatives. Truist is a financial institution; as a result, it is continuously exposed to foreign currency risk due to the consistently changing currency values. Similar, the firm’s assets and liabilities are liable to interest rate risks. Thus the solution is usually to change the prices of the assets and liabilities.
Foreign Currency and Interest rate Risk Management
The institution uses three main methods to foster foreign currency risk management. That is a strategic model that stimulates potential changes in net interest income for the next two years based on the currency. Secondly, an evaluation of interest shock and a framework that evaluates the foreign currency value of equity-based on potential interest rate fluctuations. Truist implements currency derivatives for currency swaps, forwards, options, and futures to reduce currency risk. Also, Truist Financial utilizes three core strategies to mitigate interest rate risks; that is, constant analysis of the economic value of equity. Secondly, they evaluate internal historical records of loans and deposits, which are reviewed monthly to determine interest rate changes.
Outcomes
Foreign Currency derivatives are essential for Truist because the firm has an extensive growth opportunity. In other words, they limit cash flow variations, which would otherwise prevent investment into development opportunities with high productivity potential. For instance, the merger with SunTrust Corporation offers a wide range of financial services to individual service consumers, business corporations, or even other financial institutions. SunTrust will reach consumers through its well-established digital platforms and other physical branches located in different regions all over the United States. The mitigation of foreign currency and interest rate risks is essential because derivatives are useful in managing commercial loans and securities. What are more, limited risks enable the institution to carry our transactional services for local and foreign clients efficiently.
Achievement of risk management
Due to strategic risk management initiatives, Truist maintains an operational framework that is supported by systematic business and social structures. What is more, through the support of all the employees and processes, the firm can identify, evaluate and offer timely reports on potential economic and social risks, which could arise from environmental exposures, operations, and business activities. Through risk management frameworks, risks and returns are optimized, regional and local financial services are supported while following regulations. Risk management is vital; in that, it gives Truist the capability to function as an intermediary that is proficient in enabling clientele to easily access derivatives, a wide range of security markets, and foreign currency exchange.
Firm Value and Stock Price
Truist’s revenue for 2019 was $12.6 billion, an increase of one billion from the previous year. Through the year of 2019, Truist had an overall payment of one point-three billion in stock dividends. As a result, the resultant annual payout ratio was 43.2 percent. What is more, the administrative board raised the dividend by $0.045 during 2019. Consequently, the quarterly dividend went up by 0.45 dollars per share. However, since the capital ratios were very low, Truist suspended share repurchase until capital ratio stabilizes. The suspension was essential because the firm had to maintain its liquidity. And this makes it easy for the company to meet various financial needs like loan and credit commitments, withdrawal of deposits, and repayment of borrowings on time.
Opinion on Risk Management
From a personal perspective, Truist has been sustainable because the company’s missions, objectives, and values are the supportive foundations of the overall risk management structure. As a result, the risk management operations foster independent oversight and control for risks all over the organization. In the long run, employees know that managing risk is an individual responsibility. Secondly, there is always an extensive quantitatively and qualitatively analyzed before any form of action is taken against prevalent threats. Risk management at Truist has significant impacts; that is, regular evaluation to ensure the levels of capital and expenditure are within the preferable frameworks. And this sustains the profile, in line with the risk appetite that is approved by the administration.
Comparison of the three firms
In Truist, risk management is a priority; as a result, they have an independent Board-level Risk Committee which supports the administration; in particular, concerning misunderstanding of the risk administration operations. Risk control by Twitter ensures that there is stable engagement with commercials, which is relative to productivity, growth, and development. Secondly, it ensures contracts and policies are maintained on well-established economic terms. Lastly, Teleflex risk management ensures medical technology products are manufactured while focusing on developing clinical procedures, on fostering safety and healthcare affordability. All in all, Truist Financial, Twitter, and Teleflex risk management initiatives are all useful in ensuring the companies sustain long-term productivity. By mitigating these risks, local and international consumers are consistently satisfied, and this is reflected in their net income increase.
Risk management post-Corona Pandemic
Ever since the Corona Virus broke out in Wuhan China, It has rapidly spread all over the globe to become a global pandemic. As a result, it means after the epidemic is mitigated, Truist must implement various risk management initiatives to prepare and limit losses just in case another pandemic erupts. Therefore, Truist financial company, they have to maximize on digital service provision through online service provision to limit the impacts of social distancing on business. Since the digital platform is not applicable for all the services, Truist must implement an independent assessment and evaluation department with serves the purpose of carrying out extensive research on potential risks and epidemics and mitigating them on time.
Twitter Corporation
With its main headquarters in San Francisco, California, Twitter is a social networking company. It supports micro-blogging and social interaction within an online platform where the users register and communicate with short text messages, popularly known as Tweets. However, online users who are not registered to Twitter can only view or read messages without participating until they become members of the online community. After creation in 2006, the platform has rapidly developed and has over one hundred million users. Therefore, risk management is appropriate to foster sustainability.
Foreign Currency Risks and Interest rate risks
Concerning Twitter’s interest rates, the core investment portfolio entails short-term income securities. And they include money market financial resources and investment debt securities. And in most cases, these securities are available for sale. All in all, the investment policy is usually focused on capital and liquidity sustainability. On the other hand, foreign currency risk involves transaction exposure, where a vast range of business initiatives are conducted in foreign currencies. This results in international revenue through currencies such as Singapore Dollar and Japanese Yen. And this leaves Twitter exposed to fluctuations of currency exchange rates. The basis of the fundamental necessity to make use of foreign currency affects the final decision to implement various derivatives and the preferable choice amongst multiple alternatives. Twitter has excellent economies of scale concerning the implementation and maintenance of risk management strategies. As a result, the firm has to implement currency derivatives. However, due to the prevalence of foreign currency interest risks, the Twitter administration ensures a careful selection of currency derivatives.
The objective of risk management
Usually, Twitter is affected by changes in foreign exchange rates in the process of changing financial statements from foreign subsidiaries to the United States dollars. What is more, if the precise foreign currency exchange rates vary, then the adjustment that is relatable to the foreign currency conversion ensures that losses are minimized. Profits are fostered since they form a vital part of stakeholders’ equity. Risk management by Twitter ensures that there is constant engagement with advertising, which is relative to performance, growth, and development. Secondly, it ensures agreements and regulations are maintained on economic terms that foster constant operational activities. Also, risk management serves the purpose of ensuring that Twitter users are easily convinced about the importance of products and services. Besides, if the company fails to improve services continually, then the overall engagement will reduce, and this could have adverse impacts on performance.
Foreign Currency derivatives
Twitter utilizes currency derivatives for currency swaps, forwards, options and futures to minimize currency risk. In other words, they limit cash flow variations, which would otherwise prevent investment into development opportunities with high productivity potential. Also, Twitter has an all-embracing foreign exchange rate; thus, there is potential exposure to foreign currency risk, which results from foreign business activities, international competitors, and foreign debt. All in all, these derivatives recommend that economies of scale in expenses are vital determinants of currency derivatives.
Foreign Currency and Interest rate Risk Management
Concerning interest rates, the Twitter administration ensures that the firm does not invest for speculative purposes. As a result, the investment initiatives prioritize short-term fixed-income securities. In any case, the interest rates increase, then it could have significant impacts on the fair value of the investment. For instance, a theoretical increase in interest rates of 100 basis points means that there would be a decrease in the fair value of securities that are available for sale to approximately $17.7 million. The foundation of the underlying need to utilize foreign currency exchange risks affects the final decision to implement various derivatives and the preferable choice amongst multiple alternatives. Exchange rates from international relations represent short-term financial transactions, and payment is not made until the foreign trade is complete. Therefore to ensure risks are managed effectively, Twitter often utilizes forwards solely; that I to say, the firm prefers forwards combined with futures or options, then currency swaps. In any case, the precise foreign currency exchange rates fluctuate; then, the adjustment that is relatable to the foreign currency conversion ensures that losses are minimized, and profits are fostered since they form a vital part of stakeholders’ equity.
Outcomes
Twitter has operations in the United States and other international regions. As a result, interest rate and foreign exchange are the main risks. Through the risk management investment policies, the firm does not invest for speculative purposes. However, Twitter preserves capital, which in turn supports liquidity. Twitter transacts in various currencies such as Euro, British Pound, Singapore Dollar, and Japanese Yen. Risk management has ensured the firm timely counters the fluctuation of the US dollars concerning other currencies, to minimize adverse impacts.
Achievement of risk management
Risk management by Twitter ensures that there constant engagement with advertising, which is relative to performance, growth, and development. Therefore, the reputation and brand of the company are maintained within the required levels. By controlling various risk aspects, Twitter ensures that a change in any type of product or service is in line with the General Data Protection Regulation and other regulatory policies. As a result, the potential technicalities or other challenges that could prevent the successful delivery of services are minimized.
Firm Value and Stock Price
The total revenue of Twitter in 2019 financial was 3.46 billion US dollars. A fourteen percent increase from the previous year. Commercial and advertisement revenue was 2.99 billion dollars. Total revenue in the United States of America alone was 1.94 billion dollars. The revenue of other international regions was 1.52 billion dollars. All in all, the total net income value was 1.47 billion US dollars. The annual stock price was 26.70 USD +0.15 (0.56%), and the stock compensation was 378 million dollars.
Opinion on Risk Management
Twitter faces constant competition from a wide range of rivals. To be more precise, multiple social networking platforms tend to offer similar services like Twitter. And some of the companies have vast financial resources and a broader base of users; for instance, Facebook and Google. However, Twitter has been able to maintain consistency and rapid growth due to strategic risk management initiatives. Risk management by Twitter ensures that there constant engagement with advertising which is relative to performance, growth, and development
Comparison of the three firms
Risk management by Twitter ensures that there constant engagement with advertising, which is relative to performance, growth, and development. Secondly, it ensures agreements and regulations are maintained on economic terms. In Truist, risk management is a priority; as a result, they have an independent Board-level Risk Committee which supports the administration; especially, concerning oversight of the risk management operations. That aside, Teleflex risk management ensures medical technology products are manufactured while focusing on developing clinical procedures, on fostering safety and healthcare affordability.
Risk management post-Corona Pandemic
Most institutions did not expect the adverse impacts of the current global Corona Virus pandemic. However, once it is over, institutions must implement strategic risk management to prevent potential challenges. Concerning Twitter, they might not have significant problems as other companies since most of their services are online. However, in a bid to foster the safety of employees who carry out physical employment responsibilities, Twitter must limit risk by transforming environmental responsibilities into an online framework.
Teleflex
With over thirty manufacturing sites globally and the main sites located in the United States, Germany, Mexico, and Malaysia, Teleflex is a medical technology product manufacturing company focused on developing clinical procedures, fostering safety and healthcare affordability. Teleflex designs develop and supply healthcare devices for therapeutic applications and surgery. What is more, the company markets and sells to hospitals all over the globe through direct sales and distributive initiatives.
Foreign Currency Risks and Interest rate risks
Teleflex faces various financial risks, that is, changes in market interest rates and foreign currency exchange rates. These potential risks are preventable through multiple risk management initiatives. Due to borrowing and cash balances, changes in fluctuating interest rates could have adverse impacts on productivity. That aside, foreign currency risk include changing rates on payables and receivables and inter-institution debts. Concerning the US dollars, some of the primary currencies of Teleflex are the Canadian dollar and Euro. Through cross-currency swap agreements with specific banks, the effects of fluctuations in the United States dollars to Euros exchange rates are mitigated. However, some of the swap agreements could mean that some institutions might not fulfill their obligations in the long-term, and this poses a considerable risk. As a solution to this challenge enters agreement with more than three well-developed financial corporations to have a wide range of alternatives.
Foreign Currency derivatives
Teleflex utilizes currency derivatives for currency swaps, forwards, options and futures to minimize currency risk. In other words, they limit cash flow variations, which would otherwise prevent investment into development opportunities with high productivity potential. Also, Teleflex has an extensive foreign exchange rate; as a result, there is potential exposure to foreign currency risk, which results from foreign business activities, international competitors, and foreign debt. All in all, these derivatives recommend that economies of scale in expenses are vital determinants of currency derivatives. That aside, the company usually implement cross-currency swap agreements with specific banks to mitigate the effects of fluctuations in the United States dollars to Euros exchange rates. Consequently, the interest factor in the cross-currency swap contracts affects the interest expense within the operational statements.
Foreign Currency and Interest rate Risk Management
Since Teleflex is an international company, foreign currency risks are highly prevalent. However, Teleflex implements various risk management initiatives. First of all, the firm continually assesses liquidity concerning the consistent capability to generate financial resources for investment and operational initiatives. One crucial strategy that is implemented by Teleflex to mitigate foreign currency risks is a forward currency contract. And this situation, the company establishes agreements with major financial institutions where they agree upon the purchase or sale of a given currency at a future date, based on the exchange rate at the time of contract signing.
Outcomes
By the end of December 2019, the total speculative sum for the total foreign currency concerning forward exchange agreement was 277.1 million dollars. On the other hand, the cross-currency interest rates swap contracts were 750 million dollars. All in all, Teleflex identifies opportunities through diversity and product lines. In the long run, the firm can provide medical technology products to improve patient safety and clinical procedures. Since the healthcare equipment industry is characterized by constant change and development in technology, Teleflex risk management initiatives have ensured that they develop the existing products, design, and manufacture new products in line with the latest technology. Generally, risk management initiatives have enabled Twitter to gain total revenue of $3.04 billion. Compared to the income two years ago, this is a twenty-five percent increase. As a result, the significance of risk management is quite evident. The overall increment in the total revenue is dependent on various aspects of Twitter’s risk mitigation strategies. To be more precise, the company invested in extensive advertisement and commercials within the United States and all over the globe. As a result, the total advertising income was $2.62 billion, a twenty-four percent increase from the two previous annual reports.
Achievement of risk management
Risk management has led to the optimization of healthcare facilities through the redevelopment of frameworks in a bid to minimize costs and foster competitiveness. What is more, effective risk management enables the exploration of a wide range of opportunities to increase the size and productivity of the business through the combination of acquisitions of distributors, thereby making Teleflex sole manufacturer and distributor of products and services. Risk mitigation ensures that Teleflex continually achieves regulatory and policy approvals in line with the needs of the government and other relevant institutions. Also, it has enabled the company to sustain liquidity, which provides adequate financial resources to investments and product acquisitions. That aside, Twitter ensured that they attained all the regulatory approvals concerning data licensing, and it was evident in the twenty-seven percent increment of revenue, which was a total of 425.0 million dollars. Also, the income that was gained from the United States market alone was 1.64 billion dollars, a 16% increase compared to 2017. What is more, revenue from international Twitter users’ was1.40 billion dollars interpreted as a 36% increase from the prior report of 2017. Lastly, the total cost incurred to support engagement went down by twenty percent.
Firm Value and Stock Price
The net revenue of Teleflex by the end of 2019 was $147.0 million, and this was increase as compared to 2018. And the substantial increase was based on the $142.8 million raise in the sales of typical products and an increase in the sales of new products. And they were partially influenced by adverse changes in foreign currency exchange rates of about $46.8 million. The stock price of Teleflex is 346.68 USD +16.60 (5.03%).
Opinion on Risk Management
Through effective risk management by Teleflex, the company evaluates the specific portfolio of products in line with overall goals and objectives. Through analysis, Teleflex identifies opportunities through diversity and product lines. In the long run, the firm can provide medical technology products to improve patient safety and clinical procedures. The success and dominance of Teleflex in the medical equipment industry are relatable to the firm’s efficient risk management initiatives. As a result, it has enabled the company to efficient protection of its intellectual property and gains the global acceptance of its new products and services.
Comparison of the three firms
Teleflex risk management ensures medical technology products are manufactured while focusing on developing clinical procedures, on fostering safety and healthcare affordability. In Truist, risk management is a priority; as a result, they have an independent Board-level Risk Committee which supports the administration; especially, concerning oversight of the risk management operations. Risk management by Twitter ensures that there is constant engagement with advertising, which is relative to performance, growth, and development. Secondly, it ensures agreements and regulations are maintained on economic terms.
Risk management post-Corona Pandemic
After the Coronavirus pandemic is over, Teleflex must implement various risk management to minimize the impacts of another challenge with similar adverse consequences. To be more precise, Teleflex must fulfill flexible working conditions, combined with extensive investment in the digital platform, to offer supplementary medical services. What is more, they must implement strategic risk management plans to timely identify, manage, and control pandemics before they get out of hand. And this will lead to short-term and long-term sustainability.