Application
This unit requires the application of skills and knowledge required to evaluate financial risk. The unit encompasses assessing financial risk and exposure, developing risk management processes, analysing financial histories and establishing processes to minimise risks.
The unit has application across all sectors of financial services industry and can be applied to those job functions such as accountants that have responsibility for determining the organisations exposure to financial risk.
This unit requires the application of skills and knowledge required to evaluate financial risk. The unit encompasses assessing financial risk and exposure, developing risk management processes, analysing financial histories and establishing processes to minimise risks.
The unit has application across all sectors of financial services industry and can be applied to those job functions such as accountants that have responsibility for determining the organisations exposure to financial risk.
Prerequisites
Not applicable.
Elements and Performance Criteria
Elements and Performance Criteria | |||
Element | Performance Criteria | ||
1 | Assess financial risk exposure | 1.1 | Magnitude and volatility of risks are measured to determine the extent of risk exposure and the implications for financial strategies |
1.2 | Key factors supporting or driving risk exposure are identified and timeframes established to monitor and improve performance | ||
1.3 | Short and long term financial outcomes and projections are compared with actual cash flows using standard financial analysis techniques to determine effects on liquidity and budget adjustments | ||
2 | Develop risk management processes | 2.1 | Risk management options include assessments of alternatives, criteria for success, and estimates of long and short term effects |
2.2 | Strategies are developed using standard financial analysis techniques to identify financial flows, trends in returns and adjustments in asset values | ||
2.3 | Financial recording systems are established to monitor and evaluate changes in market conditions and business needs using a range of data sources | ||
2.4 | Risk management strategy optimises the mix of asset structures and liabilities in operations and ensures flexibility to meet changing environments | ||
3 | Analyse financial histories | 3.1 | Financial performance is evaluated using trends and patterns that identify the magnitude and volatility of financial exposures |
3.2 | Long and short term financial outcomes are compared with forecasted outcomes to assess variances and parameters in performance and the reliability of financial advice | ||
3.3 | Incidents and factors increasing or diminishing financial performance are identified and analysed using standard financial analysis techniques | ||
4 | Establish processes to minimise risks | 4.1 | Recording systems to monitor financial outcomes are developed and reviewed to guide and document decision making |
4.2 | Inventories are maintained and established to ensure up-to-date records on the value of assets and liabilities | ||
4.3 | The contribution of organisational attitudes to risk taking is assessed and incorporated in risk analysis process | ||
4.4 | Parameters for variances in financial outcomes are developed, reviewed and communicated to support financial decision making |
Required Skills
REQUIRED KNOWLEDGE&SKILLS |
Knowledge requirements include: principles of risk management and budgetary control methods of storing, recording and updating financial information principles of internal control (including statutory reporting) financial legislation (eg taxable transactions, reporting requirements) ethical considerations for compliance understanding of organisational structures and lines of management authority |
Skills requirements include: recording, gathering and consolidating financial information researching and identifying applicable accounting standards and decisions interpersonal skills and communication skills (eg liaising, listening, consulting) report writing and preparation numeracy skills for calculation of data use computers, organisational accounting software systems, spreadsheet software programs and telecommunication devices to achieve workplace outcomes |
Evidence Required
EVIDENCE GUIDE | |
Assessment of performance requirements in the unit should be undertaken in an industry context. The Evidence Guide identifies the critical aspects, knowledge and skills to be demonstrated to confirm competency for the unit. Competency is demonstrated by performance of all stated criteria including the Range Statement applicable to the workplace. | |
Overview of assessment requirements | |
To achieve competency in this unit, a person must be able to demonstrate: knowledge of standard financial analysis techniques knowledge of organisation's attitude to risk ability to identify financial risk ability to develop risk management processes ability to analyse financial histories ability to establish processes to minimise risks | |
Critical aspects of evidence | |
Evidence required for demonstration of consistent performance: | Competence in this unit must be assessed over a period of time in order to ensure consistency of performance over the Range Statement and contexts applicable to the work environment. |
Delivery/assessment relationship to other units: | Prerequisite units: FNSACCT503B Manage budgets and forecasts. |
Assessment requirements | |
Method of assessment: | For valid and reliable assessment of this unit, evidence should be gathered through a range of methods to indicate consistent performance. Assessment of this unit of competence will usually include observation of processes and procedures, oral and/or written questioning on underpinning knowledge and skills and other methods as required. |
Context of assessment: | Assessment of performance requirements in this unit should be undertaken within the financial services industry context and should cover aspects of personal/financial responsibility and accountability. Aspects of competency, including the attainment of relevant knowledge and skills, may be assessed in a relevant workplace, a closely simulated work environment, or other appropriate means that clearly meet industry competency requirements. |
Resources required for assessment: | Assessment of this unit of competence requires access to suitable resources to demonstrate competence. Assessment instruments, including personal planner and assessment record book. Access to registered provider of assessment services. |
Range Statement
The Range Statement relates to the unit of competency as a whole. It allows for different work environments and situations that will affect performance. The following variables may be present with training and assessment depending on the work situation, needs of the candidate, accessibility of the item, and local industry and regional contexts. If bold italicised text is shown in Performance Criteria, details of the text are provided in the Range Statement. | |
Risk exposure may include: | credit risks interest rate risks contractual risks currency risks environmental and operational risk |
Factors supporting or driving risk may include: | organisational program costs employment costs lending and repayment criteria payment and billing schedules lending and borrowing environments |
Standard financial analysis techniques may include: | capital budgeting cost-benefit analysis 'what if' analysis time series bivariate and multivariate analyses |
Risk management options may include: | quantification of risks periodic reporting decision making authorities policy statements forecasting comparative analysis |
Financial recording systems may include: | accrual accounting reporting transaction recording operating procedures and manuals comparative costings budget reviews organisational communication processes |
Data sources may include: | budgets and forecasts financial statements and reports market valuations Australian Bureau of Statistics (ABS) economic data financial markets monitoring services (eg Reuters) credit ratings |
Asset structures and liabilities may include: | property investments shares, bonds, securities loans, leases, debts plant and equipment personnel cash accounts |
Variances and parameters may include: | budget expenditures profits and losses rate of investment returns unit costs |
Inventories may include: | assets and liabilities repayment and payment schedules compliance and completion timetables cost structures returns and performance over time |
Organisational attitudes may include: | risk aversion risk taking risk minimisation proportional risk management |
Sectors
Not applicable.
Employability Skills
The required outcomes described in this unit of competency contain applicable facets of employability skills. The Employability Skills Summary for the qualification in which this unit of competency is packaged, will assist in identifying employability skills requirements.
The required outcomes described in this unit of competency contain applicable facets of employability skills. The Employability Skills Summary for the qualification in which this unit of competency is packaged, will assist in identifying employability skills requirements.
Licensing Information
Not applicable.