3. Electronic Theses and Dissertations (ETDs) - All submissions
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Item Risk management in supply chain information flow: a study of selected food processing companies in South Africa(2023) Matlhoko, Otshepeng EddisonAs the Food Processing Industry continues to expand and becomes increasingly complex, by the same token, a number of problems encountered arise (Nguegan & Mafini, 2017). Such problems include, but are not limited to, more dynamic, differentiated and complex consumer demand, distorted supply chain information flow, the need for effective practices and the need to meet the dynamic market requirements (Grunert, 2003; Singhal, et al, 2011). All of these problems pose risks to the business performance and the supply chain management effectiveness, resulting in rising costs and declining competitiveness. Given that information is considered important tool for decision making and keeps all supply chain components updated, it was crucial to study information flow risk factors and the mitigation strategies employed by Food Processing Companies to better comprehend developments within the industry (Nguegan & Mafini, 2017). Through following the qualitative research approach, it was established that effective risk management lies in the ability of the senior leaders and management to make good decisions. It is apparent that policies and procedures are almost invariably not enough, and, in consequence, the onus is on senior leaders and management to take policies and procedures a step further by implementing a holistic risk management program which can surge business chances of success and lessen the possibility of failure (Frigo & Anderson, 2011; Singh & Singh, 2019; Sunjka & Emwanu, 2013).Item Assessing the causes of schedule and cost overruns in South African mega energy projects: a case of the Limpopo Province(2020) Tshidavhu, Fhumulani JudithCost and schedule overruns are the most common challenges in mega construction projects around the globe. The frequency of megaprojects failing to be completed on time and within budget is creating a poor reputation in the construction industry. This research aimed to assess the causes of cost and schedule overruns in the construction of megaprojects in South Africa. The objectives were to identify the local challenges militating against a project’s implementation success, to analyse the local conditions that could contribute to project implementation sluggishness, to assess planning and implementation practices in such projects and to assess the local expertise and acumen during the front-end project preparation process. Quantitative research method was employed. Questionnaires were used to collect data from engineers, quantity surveyors, architects, contractors and project managers. Limitation of the study is that leadership instability at Eskom, the South African public electricity utility company, has occasioned a climate of mistrust to outsiders making assessing informative sources difficult. Data were analysed using mean item score. The analysis indicates that poor site management, inadequate managerial skills, poor monitoring and control, lack of experience, poor financial planning, changes in the scope of work on site, variation orders, omission and errors in the Bill of Quantities, and unstable management structure were the major causes of cost and schedule overruns. Specific solutions that mitigate the causes of schedule and cost overrun should be investigated in future studiesItem Evaluation of market risk charge using internal model approach(2018) Malindi, Mvula MichaelThe revised valuation of capital requirement for market risk on non-securitizations in the trading book has become a critical field to model default events. The major reason for the process to take place is to reduce the variability in capital levels across banks and to address the flaws of the current measure. This paper provides an analysis of the impact of the new regulation framework on South Africa Equity Market across different sectors. The new measure is called the Expected Shortfall (CVar) which is the replacement of Value-at-Risk (Var) and Stressed Value-At-Risk (SVar) as suggested by Basel 2.5. The study is about the impact analysis of the new measure under Basel 4 against the current Basel 2.5 Var measure, the valuation of both metrics is done using Monte Carlo Simulation and Historical Simulation Approaches to evaluate which methodology is more efficient. The results are as follows. First, Value-at-Risk (Var) underestimate the potential large losses of equity benchmarks with fat-tailed properties and Expected Shortfall proves to be the robust metric to capture tail risks in the distribution. Second, observation from the findings is Expected Shortfall (CVar) can also disregard tail events, unless the metric is calibrated from the stressful period. Third, Monte Carlo Approach proves to be more efficient than Historical Simulation Approach. The methodology is also easy to calibrate and economical. Last, portfolio optimisation reduces the potential loss from both measures as a result reduces the market risk capital charge.Item Impact of operational risk events on market value of South Africa banks(2018) Kutumela, Jessica TshepoWith the increase in operational risk related events that has seen some of the major international banks going under we investigate the South African market reaction to public announcement of operational risk related loss events by analysing the financial impacts and possible spillover effects of announcement on the market value of the four biggest banks in South Africa. The objective of this thesis is to expose the hidden costs to banks for not having adequate operational risk management practices. The event study approached was used to estimate the cumulative abnormal returns and the following were observations from the analysis: • Evidence of significant negative abnormal returns in the announcing bank, following an announcement of a large operational loss event were found, which implies that the market value of announcing banks in South Africa is particularly sensitive to the announcement of operational risk events of an announcing bank. • Further evidence indicated that the market value decline or erosion of the announcing bank exceeded the actual operational risk event loss amount. • While transmission of announcing bank’s negative impacts to other non-announcing banks (negative intra-spillover effects - that the announcement of operational risk event losses in one bank causes contagion within the banking industry) were detected, the negative impacts were not necessarily applicable to all non-announcing banks. • On the other hand, while evidence of announcing bank’s negative impacts providing a competitive advantage to other non-announcing banks was detected, the positive reaction was found to not be the case in all banks analysed. The variation of results in the spillover effects on non-announcing banks could be attributed to the markets sensitivity to perceived risk exposure of other non-announcing bank (in a case of negative spillover effect) and perceived robustness, resilient and sustainable control environment of non-announcing banks (in a case of a positive spillover effect), to announcing banks’ operational risk loss event.Item Essays on Sovereign risk management in African economies(2018) Mpapalika, Jane JohnThis thesis investigates sovereign risk management in selected African economies. Recently, sovereign risk management practices have become a vital tool for attaining strategic debt benchmarks and are now an integral part of wider strategic sovereign debt management policies. The primary objective of sovereign debt management is to minimise the long-term cost of borrowing at a given level of risk. These strategic cost-risk objectives constitute the basis of the standard micro-portfolio theory to sovereign debt management. According to the principles of portfolio theory, this cost-risk trade-off requires the use of a wider cost concept and the associated borrowing requirements. From a portfolio perspective, the sovereign asset and liability management (SALM) approach may detect the sovereign risks in the sovereign balance sheet. Therefore, the sovereign debt crisis of 1980s, which was preceded by a high level of sovereign risks, has triggered a growing debate on the need for sound sovereign risk management in developing countries. The persistent high level of sovereign risk in highly indebted poor countries is attributed to the tendency of borrowing abroad in foreign currency and servicing the debt using the government tax revenue, which is in local currency. In turn, this creates a currency mismatch when the exchange rate depreciates in a country with floating exchange rate regime. An increase in currency mismatch leads to debt accumulation and consequently, may raise the probability of a sovereign debt crisis. Sovereign debt crisis occurs when a country fails to pay the interest rate on its debt obligations because it is either illiquid or insolvent. In theory, it is suggested that the currency mismatch can be offset by matching the currency composition of foreign liabilities and the currency composition of foreign reserves. In addition, several studies highlight that the currency composition of foreign debt can be used as a perfect natural hedge to adverse exogenous shocks, in particular, the exchange rate shocks. Our study employs panel dynamic OLS and panel fixed effects to investigate the aspects of sovereign risk management in African countries. As a robustness check, we employ the seemingly unrelated regression model and the generalized method of moments with instrumental variables. This study has three main contributions across the three aspects of sovereign risk management. The first aspect is the currency composition of foreign debt. The second aspect is the sovereign risk premium, which is the yield difference between the government bond and the 10-year US Treasury bond. The third aspect is a proposal for the use of alternative hedging instruments that can minimise the cost of debt and sovereign risks. The thesis has five chapters. Chapter 1 is the general introduction. Chapters 2, 3, and 4 are the main chapters on sovereign risk management. Chapter 5 concludes with policy recommendations and the suggestion for further areas of research. Chapter 2 investigates the currency composition of foreign debt in the selected African countries. I derive the foreign debt portfolio management model to determine the deviation of the debt portfolios from the optimality. In addition, I estimate our model using the panel dynamic Ordinary Least Squares. For robustness, I use the time-series Seemingly Unrelated Regression model for cross-country analysis. The findings show that the foreign debt management policies are suboptimal in hedging external shocks. Foreign currency debt shares are significantly affected by the cross-currency exchange rate movement in British Pound/US Dollar and Japanese Yen/US Dollar. The Swiss Francs/US Dollar exchange rate is insignificant. On the other hand, the trade patterns and the structure of the economy proxied by the manufacturing sector/GDP ratio are significant in affecting the optimality of foreign currency debt portfolios in the selected in African economies. A cross-country analysis is carried out using the time-series SUR model. Chapter 3 investigates the determinants of the sovereign risk premium in African countries. We employ the dynamic fixed effects model to determine the key drivers of sovereign bond spreads. Country-specific effects are fixed and the inclusion of dummy variables using the Bai-Perron multiple structural break test is significant at 5% level. For robustness, the time-series generalized method of moments (GMM) is used where the null hypothesis of the Sargan Test of over-identifying restrictions (OIR) and the Arellano-Bond Test of no autocorrelation are not rejected. This implies that the instruments used are valid and relevant. In addition, there is no autocorrelation in the error terms. Our results show that the exchange rate, M2/GDP ratio and trade are insignificant; hence, they are dropped out. Furthermore, our findings indicate that public debt/GDP ratio; GDP growth; inflation rate; foreign exchange reserves; commodity price and market sentiment are significant at 5% and 10% level. However, the identified structural break dates are 1979 and 1980 which are attributed to the commodity price shocks. Meanwhile, the structural breaks in 2001 and 2002 are due to the commodity super cycles. The structural breaks in 2007 and 2008 are attributed to the global financial crisis of 2007. Chapter 4 investigates instruments for financing economic development and hedging sovereign risks in African countries. We review the current risk management instruments that are used in sub-Saharan Africa and the current status quo of African financial markets, which will assist in designing appropriate hedging instruments. Furthermore, we propose alternative and innovative hedging instruments that can be used to minimise the cost of sovereign debt and hedge sovereign risks. Chapter 5 shows that these results have several important implications for policymakers in developing countries. From the risk management perspective, sovereign risk management should be based on the cost-risk criteria to hedge government’s budgetary risks from exogenous shocks. The other implication is that policymakers should avoid risky debt structures that could raise the likelihood of future sovereign defaults. Instead, they should adopt sound risk and debt management policies to prevent macroeconomic instabilities and consequently, sovereign debt crisis. Another implication is that strengthening of the domestic financial sector policies, such as stock market development, will deepen the small and illiquid local bond markets to enable borrowing in local currency and access alternative hedging instruments. Local currency borrowing reduces exposure to currency mismatches and currency risks. Furthermore, an important policy recommendation for African countries is the adoption of fixed exchange rate targeting to smooth out exchange rate shocks.Item Integration of tax and internal audit functions to improve tax risk management(2017) Sambo, Sanelisiwe MondyRisk management is an important part of business as some risks can threaten the continuity of the business. As part of risk management, organisations need to manage tax risks as tax errors have the potential to cause significant financial loss and also carry reputational and other business risks which can threaten the continuity of the business. When considering tax risks in general, it can be said that taxpayers have a risk that they are not paying the correct amount of tax. This could be could be the result of applying the law incorrectly or configuring the system incorrectly to determine the tax results of the business activities and operations. Tax professionals have the expertise to identify tax risks and recommend corrective measures from a tax technical / legal point of view, which can address both past and future risks. Internal auditors on the other hand, have the expertise to detect tax risks and recommend corrective measures from a procedure and systems point of view, which may often only address future risks. The aim of this research is to gain a better understanding of the concepts of tax risks, tax risk management, as well as the process of designing, implementing and testing internal controls to manage those risks. This will specifically include an analysis of the role of the tax function and internal audit function in effectively managing tax risks, particularly through integration. Key words: Tax, internal audit, tax risks, controls, internal controls, tax risk managementItem Macroeconomic risks and REITs : a comparative analysis(2016) Kola, Katlego VioletPurpose - The paper provides an investigation of the relationship of macroeconomic risk factors and REITs. The study considers the conditional volatilities of macroeconomic variables on the excess returns and conditional variance of excess returns in developing and developed markets and provides a comparison thereof. Methodology approach - The study employs three-step approach estimation in the methodology (Principal Component Analysis, GARCH (1,1) and GMM) to estimate the asset pricing model. The preliminary study indicated that there are only two developing economies (Bulgaria and South Africa), as defined by National Association of Real Estate Investment Trust (NAREIT), with REIT indices. We additionally included the United States as the developed economy. Findings – Our results indicate that the real economy and business cycles (proxied by GDP growth rate and industrial production index), price stability (proxied by the GDP deflator), exchange rates and interest rates do not explain developing country REIT returns represented by Bulgaria and South Africa, as well as in developed markets, represented by the US. However unlike the developing markets, changes in industrial production and inflation are important variables that affect the conditional variance of REIT returns in the US.Item Managing bank resolution in South Africa(2015-03-20) Tettey, Joseph RydellAsymmetric information, agency problems and the moral hazard, in their various manifestations, can be attributed to the collapse of financial systems over the last century. In order to guard against the negative externalities of these dilemmas, regulators in the banking sector have developed capital adequacy requirements, which measure the solvency of Banks. After the global financial crisis, regulators have realised the importance of having appropriate bank resolution regimes, in order to dismantle failing or failed banks before they become a risk to the financial system and economy. This report s analyses how the South African Reserve Bank resolves systematically significant banks.Item Threats associated with build, operate and transfer (B.O.T) infrastructure projects in Southern Africa and the impact it has on the risk profile.(2014-01-15) Moloigaswe, Shimah.The rapid economic growth in many developing countries results in a high demand for infrastructure and governments find that they are unable to fund the vital infrastructure or to maintain the existing ones (Gupta and Sravat, 1998). To remedy this they are increasingly opting for an alternative source of funding through the large international companies which have considerable credit standing for concession contracts such as Build Operate and Transfer (BOT) since those companies have a much larger capacity to fund the large scale projects than the recipient country. The objective of this research project is to provide a brief review of the South African experience with the utilisation of the BOT approach for infrastructure developments, examining the risks and the measures used to mitigate them. This is so as to draw lessons for policy makers on how to improve the use of this strategic instrument for infrastructure provision. The emphasis will be on overall risks associated with the scheme as well as the mitigating factors in light of the current social, political and economic context of the country and the region. Data was collected using the Delphi survey method and the study targeted individuals who were knowledgeable and experienced with the issues under investigation and from different sectors involved with execution of BOT infrastructure development projects in South Africa. These included contractors, lenders, operators as well as some from the host government. The questionnaire was designed to identify the perceptions of the individuals regarding risk management in BOT projects as well as identify significant risk associated with the scheme. The 10 most critical risks were ranked based on the ratings of the respondents in the final phase of the Delphi survey. The risk that was rated the most critical turned out to be ‘Political instability in the host country’. This is defined as the danger of political or financial instability in the host country caused by events such as insurrections, strikes, creeping expropriation and outright nationalization.Item Liquidity risk management in the banking book: a practical framework approach to Basel III regulations(2013-08-26) Nkou Mananga, Pierre CelestinThe recent market turmoil caused by the subprime crisis highlighted the fact that an inappropriate liquidity risk management process may strongly affect the capacity of banks to maintain their financial equilibrium and economic performance under stress conditions. In addition, it has been observed that the most significant challenge facing banks when they are adopting new regulations such as Basel I, Basel II and now Basel III is the imminent threat of imbalances between the interests of the shareholders and those of the regulator (Chabanel, 2011). This thesis proposes a framework on liquidity risk management in the banking book that a bank may adopt so as to improve the way in it could manage the anticipated changes within tits regulatory environment.