Compensation and bonus policy's impact on risk management

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  Let's analyze and discuss the first question. 1. Relative to the Agency Problem, how do compensation and bonus policies impact risk management?

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  489172 Executive Compensation and Agency Risk Relative to the agency problem, how do compensation and bonus policies impact risk management?

• Delphi Technique in Risk Management

  We try to see what the impact would be on projected cash flows as also try and incorporate the risks into the project so as to make the cash flows more resilient to risk.

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  There are several studies that focus on the contract with management and how it can be used to align the interest of the management and shareholders.

• NOT an example of increased compensation due to higher risk

  Oil platform welders receive 33% higher compensation for working on rigs that drill in deeper waters, and at higher pressures, than others. Airline pilots receive a 10% bonus for completing a month of on-time flights.

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  It provides the profitable opportunities to minimize the risk in the contract. In this way, it efficiently manages the monitor on the working of owners and managers.

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  The bonus has to be a percentage of the base salary based on meeting defined metrics. The executives have to focus on not enriching oneself but to focus on growing the nonprofit. Attracting and retaining top talent is very important.

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• How are accounting numbers used to monitor this agency contract between owners and managers?

  Calculated on this the bonus will be @ 1% that is 22,500 and the net income after bonus and taxes to the company will be $ 2,227,500.