Analysis Of Risk, Uncertainty And Managing Incentives

Select a company of your choice, any company but Southwest Airlines, and write a six to eight (6-8) page paper in which you:

  1. Evaluate a company’s recent (with in the last year) actions dealing with risk and uncertainty.
  2. Offer advice for improving risk management.
  3. For the company you selected examine an adverse selection problem and recommend how it should minimize its negative impact on transactions.
  4. For the company you selected determine the ways in which it is dealing with the moral hazard problem and suggest best practices used in the industry to deal with it.
  5. For the company you selected identify a principal-agent problem and evaluate the tools it uses to align incentives and improve profitability.
  6. For the company you selected examine the organizational structure and suggests ways it can be changed to improve the overall profitability.
  7. Use at least five (5) quality academic resources in this assignment.  Note: One of your references regarding your research should have been published within the last 6 months. Note: Wikipedia and Investopedia do not qualify as an academic resource.

Part 2 (only a short paragraph is needed)

The Principle-Agent Problem, To Manage Incentive You Have to Understand Motivation.

What Is the Principle-Agent Problem?  Here is some help.   https://www.youtube.com/watch?v=cpu0dw9VY2E

The 2nd Case Study   https://www.nbcnews.com/business/business-news/another-wells-fargo-ceo-steps-down-about-damn-time-longtime-n988671

In this part we look at the principle-agent problem and what went wrong at Wells Fargo. After another CEO Tim Sloan the CEO who was suppose to restore the bank’s reputation stepped down March 28, 2019 there are still huge questions. https://www.americanbanker.com/news/fed-wont-lift-wells-fargo-cap-until-deficiencies-are-fixed-powell

What about the incentive system resulted in massive creation of fake accounts by the retail operation and why did it only get worse from there? As you dig into this remember Froeb’s rule “Avoid the temptation to think about the problem from the employee’s point of view…{and ask} how does the organization give employees enough information to make good decisions and the incentives to do so?”

 
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