FINANCIAL GROUP RISK MANAGEMENT MODEL AND SOFTWARE
The concentration on a variety of activities is a term, in the current literature on finance and investment, with which everybody is more or less familiar. The survival of the largest financial groups produced by linking the banks, insurance companies, investment firms and other companies which are active in the capital market depends on their policy and policy-making in controlling the issue of focus in complicated interconnected networks. In a financial group, no goods or services are produced, whereas, its purpose is to manage other companies. The companies controlled by parent company are known as “subsidiary companies”. The philosophy of creating a holding is to link several companies and create a large holding company in several investment fields and its specialized subsidiaries to make profit and outsourcing the activities as well. A holding can develop different plans in business and specialized fields and then divide the work and devolve each project responsibility to a company. The parent holding company (center of the network) can create synergy by providing strategic management among its subsidiaries; in other words, the holding company only plans a project and leaves the implementation and operation of it to subsidiary companies. In this study, we will introduce new indexes which help the managers at companies which are the members of a financial group and the managers of the parent companies to make more accurate decisions for a) investing, b) lending, c) crediting, d) profit gaining, e) risk accumulating and f) EPS and DPS payment to stakeholders. Furthermore, these indexes help the managers not only to be dependent on the two criteria; profit and investment, but also consider the contagion risk for each interconnected firm with new measurements. We introduce five criteria as it follows: Risk Box Index, Dynamic Risk Space Index, EPI (Earning per Investment), NEPI (Net Earning per Investment), and RI (Risk Index) as well as employ risk indexes in modeling and software developments. In this new model and software, the robust connections among the companies which are the members of a financial group are studied for the first time. After studying each company individually and implementing the risk factor of each by new indexes, the risk contagion effects on holding center are calculated and modeled. The new indexes help the management holdings to make correct decisions relating to any kind of investment or awarding group facilities with considering risk and profit prospects. It is investigated that if a company defaults to meet its obligations, how much this will affect the other companies of the network and holding center performance. The topology of the financial group network is displayed graphically for the first time and the structure of it, is presented as well. Finally, with the use of these tools, a software has been developed with real data and the results have been confirmed and found significant by senior and professional board of directors.