Financial Markets of Telstra Corporation-Samples for Students

Question: Discuss the main Business of the Chosen Company, its sources of risk, importane of its risk Management. Answer: Introduction: An Australian Telecommunication and Media company also known as Telstra, Telstra Corporation Ltd. operates in market voice, telecommunication, internet connection and mobile market in the country. It is the largest telecommunication company in Australia with range of services that extends to providing entertainment and television products too in the market. Since the field of business in which the company operates is a highly competitive market the ambit of risk is also vast for the company. The ever increasing risk of product obsolescence in the market is one of the highest priorities for the management to ensure continuity in the long run. Apart from the risks of product obsolescence the risk of new firms entering the market is also very high due to the enormous potential of the market. Thus, the management has to always be on its toe to maintain its market share with the objective of increasing the same in the long run. The amount of investment requires to run a telecommunication company is another factor that contribute to the overall risk environment of such companies. Making best use of available funds is an important factor to run an organization in telecommunication industry (Barikani et al., 2014). Managing the risk effectively is of utmost importance for Telstra Corporation Limited to achieve its business objectives on regular basis. Using the resources of the organization effectively and efficiently in business operations will help the company to manage its overall risk and reduce the overall risk to an acceptable level. Risk management system: The company has a separate division of research and development that looks to continuously improve the products and services that are to be offered to the customers. Huge amount of investment is made on technological innovation to deal with obsolescence if products. The company is always on the look out to find alternative investment proposals to make optimum usage of its funds to re-invest the same in the business to improve the operations within the organization (McNeil et al., 2015). Derivative financial instrument is a financial instrument that depends on another source, is also used by the company to invest its funds in financial instruments. Managing the investment in derivative instruments is essential to the successful financial management of the company. Different types of derivatives: Derivatives that are traded in a recognized stock exchange is known as exchange traded derivative. Others derivatives are traded over the counter. The company operates in both types of derivatives. Apart from the above the company also uses collateralized debt obligation and common derivative contracts along with forwards and future contracts to manage the risks in financial market. A close look at the annual reports of the company over the last five years will show us how the company has moved away from OTC derivatives to exchange traded derivatives to reduce the overall risks associated with trading in derivatives (Chance Brooks, 2015). A closer look at the annual reports of Telstra shows that over the last few years the company has been able to make efficient use of forwards and futures contracts to manage the risks associated with foreign exchange transactions. Thus, it can be said that managing in order to manage the foreign exchange fluctuations the company has made efficient use of forwards and futures contracts. Hence, the derivatives have fulfilled the purposes of the company for which these have been used by the company in the past. The use of derivative in modern business environment have increased multiple folds. As the effect of globalization has truly set-in in the global business market and the increase in the number of foreign exchange transactions, the multi-national companies have increased the usage of derivatives to deal with different risks involved in financial market. Thus, the usage of derivatives in financial market have increased after globalization (Gitman et al., 2015). The use of derivatives changes with the changes of characters, sizes and leverages of an organization. As a company gets bigger in size, i.e. its increases its operations and expands its market internationally it becomes necessary for the organization to make use of different types of derivatives to deal with different risks involved in doing business internationally. Thus, usage of derivatives changes along with the changes in sizes, leverages and characters of an organization. For a small company that has a limitation as far as the operation of business is concerned will be far less motivated to use derivatives to deal with financial risks as compare to a multi-national company (Petty et al., 2015). Conclusion: Derivatives are playing an important role in managing the overall risks associated with the financial markets in case of Telstra Corporation Limited. As the company improves its performance in the future and expands its operation further the efficient utilization of derivatives will gain more importance. References: Barikani, M., Oliaei, E., Seddiqi, H., Honarkar, H. (2014). Preparation and application of chitin and its derivatives: a review.Iranian Polymer Journal,23(4), 307-326. Chance, D. M., Brooks, R. (2015).Introduction to derivatives and risk management. Cengage Learning. Gitman, L. J., Juchau, R., Flanagan, J. (2015).Principles of managerial finance. Pearson Higher Education AU. McNeil, A. J., Frey, R., Embrechts, P. (2015).Quantitative risk management: Concepts, techniques and tools. Princeton university press. Petty, J. W., Titman, S., Keown, A. J., Martin, P., Martin, J. D., Burrow, M. (2015).Financial management: Principles and applications. Pearson Higher Education AU.