Hong Kongs Approach to Financial Stability - Essay Example

Introduction It is difficult to predict if a financial crisis is to happen in an organization or a certain company and little can be done by the organization when a crisis occurs. However, setting funds and subjects by an organization is very important, and good financial preparation is very crucial in crises control and management. Crises management is a process by which an organization deals with major events to the threat that tries to bring harm to the organization. Crises management The fact that during a crisis, there is less time to spend in solving the crises situation makes it even more difficult.

Most of the crises oppose as threats to major organization and thus if not properly dealt with results to serious consequences to the organization. It may be the downfall of the certain organization or company facing the crises. Most of the financial organization lack a crises manager whose main work is to foresee the unpredictable circumstances or events that pose as a threat to the organization. This makes it even difficult to face the problems. Planning in detail for response to as many potential crises is crucial.

Due to the financial constraints that most of the organization face it becomes very difficult to set aside funds to plan for response of a crisis. Establishing monitoring systems to foresee the threats in an organization is also very expensive. Training and the establishment of a crises management team are very crucial which little financial organization take for granted. It becomes very difficult for an untrained team to handle crises and in many cases; they will mismanage the crises thus for the above reason many of the organizations find it challenging in solving crises (Chan et al, 102).

Policies to stabilize the financial plan Because of the recognition that financial crises are probably unavoidable; the authorities in Hong Kong have maintained a conservative approach to regulatory and supervisory policies. Several policies have been implemented in the Hong Kong’s Approach to ensure that there is financial stability in avoidance of crises. If there were better warning signs and indicators, organization could have the ability of avoiding major crises such as the trans-Atlantic financial crises.

Many warning indicators have been set in the many departments to alert organizations in case of an impending crisis. Market intelligence is also an important strategy employed by the different organizational departments when dealing with crises. Cooperation between essential organizational departments has also been incorporated to provide early warning signs of macroeconomic and financial risks and the possible actions to be taken to address them. To enhance the knowledge of solving and dealing with crises management departments have trained and appointed specific staff to only deal with crises management and control.

Over the years, research departments have developed models in the housing market. This falls into three categories; risk indicators and transaction volume indicators, equilibrium or fair value housing prices models and forward-looking asset-pricing models. They provide fair value of property against which the current price levels are important in evaluating the evaluation risks involved (Chan et al, 102). Macro prudential regulations Property importance in Hong Kong has been very important. This is as a result of focus on exposure to the property market in the financial stability market.

Macro prudential regulations are very essential in preventing bank credit from fueling property price bubbles in ensuring that banks and their customers have sufficient cushions on their balance sheets for them to survive the volatile property pricing. The policies help to dampen the amplitude of property price cycles thus preventing collateral damage that other policies might cause to the organization. Thus, the use of such regulations is very important as they serve a cushion on the organizational property and assets.

They act to prevent any damage that may be caused by other policies from other organization that may cause absent or may lead to a crisis occurrence in Hong Kong property prices is the highest risk to economic wellbeing. The government response is by application of a double stamp duty on all properties (Chan et al, 102). Conclusion It is crucial to ensure that before the occurrence of a crisis advanced preparation and readiness is done. Various organizational departments ought to work together during a crises state and help quickly solve the problem.

However, crises department teams need to be very accurate in providing information about a crisis. If they present too many false alarms that crises is about to happen and it does not then they lose their credibility. Maintaining financial stability is essential to ensure crises survival as well as crises prevention Work cited Chan, N., W. Peng, & K. Fan. “A Graphical Framework for Monitoring the Property Market in Hong Kong.” HKMA Quarterly Bulletin March, 2005. (42): 5–12.