FIN5DER Derivative Securities: Robert Half (RH) Company

Question:

Robert Half (RH) is the prime recruitment company in Australia looking for highly talented, skilled and willing to learn postgraduate candidates for various permanent or contract jobs. According to their current webpage, Robert Half specializes among others “in providing businesses with skilled accounting and finance professionals on a permanent and contract basis.” In 2022, there will be several Risk Management roles in Australian companies. The detailed list of responsibilities for the Risk Manager positions are summarized in the RH’s Risk Management job description guide.

Part 1

RH’s pre-employment assessment for this position is to gauge the knowledge of accounting and finance professional candidates with respect to:

  • derivatives markets and structures
  • types of derivatives by categories and classifications
  • derivatives instruments and models for managing financial risk
  • the role of derivatives in transferring risks in the economy
  • ways of designing contingent claims for assessing and managing company risk
  • sound understanding of the trade-off between utilizing or not utilizing derivative instruments in financial risk management.

To apply for these positions, you need to demonstrate your knowledge relevant to the job description in a short essay by providing:

  1. a concise overview of derivatives markets and tools
  2. three different examples of powerful and effective deployment of derivatives instruments and contingent claims
  3. three different examples of dangerous and ineffective deployment of derivatives instruments and contingent claims.

Assignment Part 2

You have successfully passed the pre-employment assessment and have been invited to attend an interview. You have been informed that during the interview you will be asked to discuss how you would deploy risk management strategies by using derivatives instruments by presenting specific financial risk management scenarios as follows.

Financial risk management scenario for BHP

This year, the RH Recruitment Manager has selected the leading blue chip Australian company BHP as a test case study for all candidates who will apply for the Junior Financial Risk Manager role at BHP. Consider the recent BHP announcement of its intention to create a global top 10 independent energy company through a merger of BHP’s petroleum business with Woodside and also material covered in this subject, including the industry guest speaker talks and financial news and articles in the press. Discuss one likely scenario by outlining usage of derivative instruments in the next 12 months

Financial risk management scenario for BlackRock or Vanguard

You are applying for the Junior Financial Risk Manager role at either BlackRock Australia or Vanguard Australia. Both fund managers have large shareholder cohorts in the leading blue chip Australian company Fortescue Metals Group (Fortescue or FMG). Recently, the Chairman of Fortescue, Dr Andrew Forrest, has announced that his company will create green hydrogen industries. Based on material covered in this subject, including the industry guest speakers’ talks and recent financial news and articles in the press, discuss one likely scenario and outline usage of derivative instruments in the next 12 months. Your role is to ensure that the selected fund manager, either BlackRock or Vanguard, stays competitive.

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