Risk Financing Essay Paper

Posted: January 1st, 2023

Risk Financing Essay Paper

Preparation Imagine yourself in the role of a risk manager. Select a topic related to risk financing and identify a risk financing issue. This issue may be from a selected organization or from your workplace. As an example, you might select the issue of financing potential malpractice suits at a medical clinic. Refer to the Suggested Resources to ensure that you have a solid understanding of the financial dynamics related to this type of issue. Instructions Memo – Risk Financing Issue Create a 2– 3-page internal memo.Risk Financing Essay Paper.  Follow the steps below and include them in the memo: Concisely describe the issue and the organization. Summarize the legal and ethical financial risk obligations of an ACO. Describe how you would identify and manage risk financing issues within this organization. Support your choice of strategies with relevant resources. Recommend two or three of the best options for risk financing for this issue, as it relates to the organization in question. Include at least three APA-formatted in-text citations and accompanying congruent APA-formatted references. Your sources can be a course textbook, assigned reading, or any other scholarly source. Additional Requirements Written communication: Written communication should be free from errors that detract from the overall message. Memo format: Format your memo so that it reflects the professional standards of your organization or accepted standards of a professional memo in the industry. Risk Financing Essay Paper


DATE:  January 10, 2019

FROM: __________________

TO: David Ottati, President/Chief Executive Officer, Central Florida Division

SUBJECT: Recommendation–Partnering with financial institutions to setup an infrastructure project bond to allow Florida Hospital South to expand its facilities

The purpose of this memo is to officially recommend that Florida Hospital South (FHS) go into partnership with financing and development institutions (such as World Bank’s Multilateral Investment Guarantee Agency and European Bank for Reconstruction and Development) to present an infrastructure project bond that features transaction with credit enhancement in terms of risk mitigation. The partnership would spread underlying expansion and construction project risks so that they are no fully borne by FHS. This would allow FHS to carry out expansion activities that include construction with minimal financial risks (Madura, 2014). Risk Financing Essay Paper

The partnership with financing and development institutions is anticipated to offer FHS three advantages. Firstly, it will present the hospital with long term maturity bonds (such as 20 years) that allows the hospital ample time to pay back after the construction project has become operational and profitable. Secondly, these bonds have a high rating that allows the hospital to access financial beyond its credit rating. Finally, the hospital’s construction and expansion efforts would benefit from risk mitigation provided by the financing and development institutions through their unfunded liquidity and risk insurance coverage (Madura, 2014).


The partnership is expected to avail payment-based projects that are structuredas a partnership that forms part of the hospital’s expansion project. This is in consideration of the fact that the hospital considers that equal access to health care is a key priority given that the number of hospital beds do not meet the existing demand, falling short by approximately 16%. The problem is expected to worsen at the rate of 3% every year if not addressed with immediacy (Mason et al., 2015). Besides that, FHS is an accountable care organization (ACO) with the primary responsibility of implementing the Patient Protection and Affordable Care Act (PPACA). As an ACO, FHS faces ethical pressure with regards to justice, beneficence and autonomy. With the current situation that sees a 16% deficit in the required bed space, it is not surprising that conflicts arise based on the mandate to improve overall population health, a motive to undertreat patients with conditions that do not have performance measures, and bias against certain patient populations. The recommendation is that these conflicts are best addressed through increasing the number of hospital beds (Healey & Evans, 2015; Yoder, 2013).Risk Financing Essay Paper

The partnership is expected to improve, modernize and expand health care services in FHS. In fact, it will deliver increased bed space. Through the partnership program, FHS will gain the capacity to design, build, finance, and maintain expansion project agreements for managing its facilities. The core medical services would remain under FHS control. The partnership is anticipated to offer three features. Firstly, an availability based financing system that providesan appropriate protection mechanism from the forex markets and inflation. Secondly, a capped deduction regime that covers both the service payments and availability. Finally, an advantageous termination compensation regime with full coverage that addresses all conceivable termination scenarios to include expropriation, force-majeure and default by FHS (Madura, 2014).

The project will expand FHS bed capacity by 50%, to include expanding the oral and dental health, psychiatric, pediatrics, maternity/women, emergency,and general care departments. Under the partnership agreement and upon completion of the expansion project, the financing and development institutions will provide soft and hard facility management services, while health care and clinical services will remain within the remit of FHS (Huston, 2014).

The partnership’s financing structure will comprise of 30% equity and 70% percent debt. The debt will be issued in the form of bonds whose proceeds would be presented to FHS in the form of lending under an issuer-borrower arrangement. The bonds would be issued as differed draw feature bonds that allow for the funds to be drawn when required in the course of the hospital expansion project. This is intended to lower the financing cost. A risk insurance guarantee will be provided to mitigate risks of expropriation, contract breach, and funds non-transferability and inconvertibility (Madura, 2014). Risk Financing Essay Paper

The partnership will deliver an innovative financing and credit enhancement structure that allows FHS to access bonds with an investment grade rating above its credit rating. The high investment grade rating will be possible through risk mitigation by the financing and development institutions who will offer unfunded liquidity facilities and risk insurance to enable the rating to rise. It is expected that the partnership with draw the attention of other international and national financial institutions that seek to offer credit enhancements to health care projects seeking to address PPACA objectives. In addition, the project is expected to draw the attention of institutional investors that are seek for new ways of investing in infrastructure within the health care industry (Madura, 2014).

In closing, I would like to say that the proposed partnership represents a step forward in demonstrating FHS commitment towards addressing the infrastructure gap that if faces in terms of the existing 16% shortfall in existing bed space. I believe that FHS will benefit from the proposed partnership.Risk Financing Essay Paper

Please let me know if you have any questions or comments.

Name: ____________





Healey, B. & Evans, T. (2015).Introduction to health care services: foundations and Challenges. San Francisco, CA: Jossey-Bass.

Huston, C. (2014). Professional issues in nursing: challenges and opportunities (3rded.). Philadelphia, PA: Lippincott Williams & Wilkins.

Madura, J. (2014).  International financial management (12thed.). Boston, MA: Cengage Learning.

Mason, D., Gardner, D., Outlaw, F. & O’Grady, E. (2015). Policy & politics in nursing and health care (7thed.). St. Louis, MO: Elsevier.

Yoder-Wise, P. S. (2013). Leading and managing in nursing (5thed.). Amsterdam: Elsevier Health Sciences. Risk Financing Essay Paper


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