Big Bang and Commercial risk: Difference between pages

From ACT Wiki
(Difference between pages)
Jump to navigationJump to search
imported>Doug Williamson
(Create the page. Sources: Moles and Terry, The Handbook of International Financial Terms 1999, Oxford English Dictionary 2010.)
 
imported>Doug Williamson
(Add links.)
 
Line 1: Line 1:
1.
== International trade ==
 
Commercial risk arises from a foreign business partner’s insolvency or unwillingness to pay its debt or to perform according to the contract.


''UK - London Stock Exchange''
For example the insolvency or unwillingness of a bank, customer, supplier or guarantor. 


'Big Bang' refers collectively to three major changes at the London Stock Exchange which took effect on 27 October 1986:
Letters of credit and documentary collections can provide some measure of protection against commercial risks of this kind.
*The introduction of negotiated brokerage commissions, rather than the fixed commission system previously in force.
*Allowing members both to make markets and to act as brokers ('dual capacity'), rather than being restricted to one role or the other ('single capacity') as in the past.
*Widening of membership and ownership rules, allowing foreign banks to enter the market.


There was also a significant change to introduce electronic trading, replacing the previous 'open outcry' system.


== Commercial activities ==


These changes led to a period of rapid expansion, as foreseen and intended by the UK government at the time, led by Prime Minister Margaret Thatcher.
More generally, commercial risks are risks arising directly from, or in the context of, the commercial activities of the business.


Some commentators link Big Bang with subsequent excessive risk taking - especially the use of bank depositors' funds for speculative activities - contributing to the conditions which led to the Global Financial Crisis of 2007/08 and onward.
Commercial risks are the business risks in which the organisation considers it has a core competency, and which the organisation therefore chooses to accept and manage in the expectation of superior average returns over time.
 
 
2.
 
By extension, the term 'Big Bang' is also used to refer more generally to the changes in - and expansion of - financial markets in the UK (and elsewhere) in the mid-1980s.
 
 
3.
 
By analogy, similar sudden changes in - and expansion of - other markets are also sometimes known as 'Big Bang' events.
 
 
''The source of the term 'Big Bang' is in cosmology. The widely-accepted Big Bang Theory is that the universe originated from a tiny fireball which exploded with great speed and violence around 14 billion years ago, expanding and cooling to form galaxies, stars and planets.''




== See also ==
== See also ==
*[[Broker]]
* [[Business risk]]
*[[Broker-dealer]]
* [[Counterparty risk]]
*[[Global Financial Crisis]]
* [[Credit risk]]
*[[Institute of Business Ethics]]
* [[Documentary collection]]
*[[London Stock Exchange]]
* [[Enterprise risk management]]
*[[Market maker]]
* [[Letter of credit]]
*[[Open outcry]]

Revision as of 12:31, 14 June 2016

International trade

Commercial risk arises from a foreign business partner’s insolvency or unwillingness to pay its debt or to perform according to the contract.

For example the insolvency or unwillingness of a bank, customer, supplier or guarantor.

Letters of credit and documentary collections can provide some measure of protection against commercial risks of this kind.


Commercial activities

More generally, commercial risks are risks arising directly from, or in the context of, the commercial activities of the business.

Commercial risks are the business risks in which the organisation considers it has a core competency, and which the organisation therefore chooses to accept and manage in the expectation of superior average returns over time.


See also