INVESTING RISKS: Retained Earnings, Weighted Assets and Sequence of Return

Posted on November 6, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

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Retained Earnings Risk: Profits generated by a company that are not distributed to stockholders as dividends. Instead, they are either reinvested in the business or kept as a reserve for specific objectives, such as paying off debt or purchasing equipment. Retained earnings risks are also called “undistributed profits,” “undistributed earnings,” or “earned surplus.”

Risk-Weighted (or risk-adjusted) Assets: Within the context of measuring the financial stability of banks and other financial institutions, the risk-weighted assets figure is an aggregate of a financial institution’s assets (usually loans to its customers) after the loans have been individually adjusted for their risk. This involves multiplying each loan by a factor that reflects its risk. Low-risk loans are multiplied by a low number, high-risk by high. The aggregate number can then be used to calculate the financial institution’s capital ratio. Lower risk-weighted assets typically result in higher capital ratios, and higher risk-weighted assets usually translate to lower capital ratios.

Sequence-of-Returns Risk: The risk of market conditions impacting the overall returns of an investment portfolio during the period when a retiree is first starting to withdrawal money from investments as income. For example, if a retiree has to withdrawal income from his or her portfolio when market prices are depressed, the portfolio may lose out on the potential returns that income could have made once market prices recovered.

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PATTERNS OF MEDICAL RISKS

Posted on November 21, 2020 by Dr. David Edward Marcinko MBA MEd CMP™

PATTERNS OF PRACTICE RISKS

One of the next big areas of risk that will surface in the near future is the Pattern of Practice Risk.

Pattern of Practice refers to the way that a particular physician practices medicine. With computers, eHRs, standardized diagnosis and treatment codes, and the budgetary restraints inherent in medical practice, it is becoming easy to analyze a physician’s method of practice.

The treatment and diagnosis codes that a physician uses and submits to third party payers can be quantified and compared colleagues in the same or similar specialties. Statistical outliers can be identified. These outliers will then be further audited and required to justify their treatments. If no rational basis exists for the statistical differences, the outlier may find himself the subject of a fraud investigation.

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