Discussion the Case Study on the Liquidity Management at UBS

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Problems

Like any other financial company, there are a number of risks that present themselves when carrying out the normal business transactions. One of the major problems that the organization faces is the liquidity and funding management. The two factors are quite important if a company wishes to remain on top of the financial business and to avoid being liquidated. Liquidity is defined as the process through which a company has enough assets as compared to its debts which is something that helps to keep it afloat. Therefore, it is a matter of concern for each organization in the world. Moreover, a company has to focus on how it would be funded and therefore, funding is a matter of concern (Bruce 2006). It is through funding that a company manages to stay afloat in the financial market and have liquidity. Through these areas, UBS Company would be made better in terms of ideas and longevity. The problems that the company faces are diversified since they are based on a wide base and the organization further deals with a wide range of products. The organization also faces the risk as to how it would balance its risk and rewards and consequently, these problems even though they may not be unique, are presented throughout the company (Cralle & Leshik 2011). The company additionally has to focus on regulatory compliance that would present it with a base through which it can carry out its business in the financial market without exposing itself to legal risks. Whenever there are no legal compliances that are presented by a company, it is usually under authority supervision, and that is one incident that a company like UBS would like to avoid since it presents a negative picture to the whole public who are the company’s financial base. There are a number of counter measures that companies employ so that they may avoid becoming liquidated. One of these ways is through diversification and globalization. However, a company may not avoid the risk through these not usually full proof ways. This is because with each way a risk is countered, there is a new risk that presents itself. With diversification, the company does not fully counter liquidity risk as diversifications means more work force and finances (UBS 2011).

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Lessons learnt

From liquidity management of UBS, there are a number of lessons that are learnt. One of the most valuable lessons is that in order to avoid liquidity, a company should be diversified. UBS has diversified its resources in such a way that it is able to have a wide base through which it can spread its risks. The company is involved in banking in Switzerland, asset management involving intermediaries and institutional investors (Pristas 2007). Finally, the company is also involved in investment banking and provides securities to business products. In addition to that, the company has ensured that it has funding management. The lesson learnt from this is that an organization has to ensure that its funding is always in line so that it may have security (OECD – Organisation for Economic Co-operation and Development 2011). Additionally, another lesson that is learnt from the company is the way funding and liquidity is defined. One other lesson is the way that funding risk is defined. It is defined as the risk to the company’s on-going ability to raise sufficient funds to finance actual and proposed business activities on an unsecured or secured basis to an acceptable price. In addition to that, the other risk that is defined is the liquidity risk. The lesson learnt here is that the company is quite definitive of the variables that make it a strong business (Duttweiler 2009). Another lesson learnt is the function of the treasury that is to make sure there is a sound way funding is obtained to ensure that liquidity is something of the past. Another vital lesson learnt is the global liquidity sheet of the company that is the universal diversification of resources; there is a way through which liquidity is controlled, and there is security using different currencies. The final lesson learnt is the way through which the analysis on the company is carried out to preserve a well-balanced and diversified liability structure (BackgroundNow.com Staff 2008). The company carried out a Cash Capital Analysis. This type of analysis from the findings is the one that is quite effective.

Recommendations

In reality, it is evident that there is no situation through which the company can be fully protected from financial risks. However, this does not mean that organizations should not try to limit or better yet look for ways through which they can counter the liabilities. This then means that companies should look for more than one way to counter the flow (Risk 2006). With that said, there should be more than two ways of guarding against liquidity, and that is one point that UBS Company has failed to consider. The company has only focused on diversification and funding (Commerce Clearing House 1964). Nevertheless, what would happen if these options were not available? It would mean that the company would be open to liquidity. Therefore, one of the options that the company must consider is a way through which it can counter the deficiency aforementioned. Another recommendation that should be considered is the way that the company organizes and raises its funds. The company should have set rules as to where it can collect its funds since the open way that it collects its funds may lead to corruption. Bad image is something that an organization of its stature should not be accustomed to. Additionally, the company should also work on its bank’s liquidity management if it wishes to ensure heaven in the financial market. The current analysis that is in play and overseen by IB FXCCT is not that efficient and hence it would mean that in order to ensure that the analysis is quite efficient, the company should use a number of ways other than the one in play. Diversification consists in the fact that a company avoids liquidation which is usually not an easy task. Financially risk is something that is quite not a good thing for a company to expose itself and, hence, it means that in order for UBS to be secure, there is the need for it to have trusted partners in the financial basis. Overly, UBS is a company that has adequate security in terms of liquidity, but it still needs to do more to ensure that it is safer than it is currently (Blackburn 2008).

Reference List

BackgroundNow.com Staff, 2008, Auction Rate Securities Settlements with Citigroup and UBS to Provide $30 Billion in Liquidity: Sec Civil Complaints: V. Citigroup Global Markets and V. UBS Securities and UBS Financial, Web.

Blackburn, R 2008, Citigroup Global Markets, Inc.; UBS Securities LLC and UBS Financial Services Inc.: Securities and Exchange Commission Litigation Complaint (UBS), DIANE Publishing, California.

Bruce, M F 2006, Liquidity Management at UBS, Cengage, New York.

Commerce Clearing House 1964, Federal securities law reporter: federal regulation of securities : laws, regulations, forms, rulings and decisions currently supplemented and indexed, Volume 1, Commerce Clearing House, Chicago.

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Cralle, J & Leshik, E 2011, An Introduction to Algorithmic Trading: Basic to Advanced Strategies, John Wiley and Sons, New York.

Duttweiler, R 2009, Managing Liquidity in Banks: A Top Down Approach, John Wiley & Sons, New York.

OECD – Organisation for Economic Co-operation and Development, 2011, Policy Issues in Insurance The Impact of the Financial Crisis on the Insurance Sector and Policy Responses, OECD Publishing, New Jersey.

Pristas, G 2007, Limit Order Book Dynamics and Asset Liquidity, Cuvillier Verlag, New Jersey.

Risk, 2006, Risk, Volume 19, Issues 1-6, Risk Magazine Limited, Michigan.

UBS, 2011, Liquidity Management. Web.

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