Chp 8 Risk Management

Jul 17, 2026

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Chapter 8 Risk Management defines risk as exposure to adverse consequences from uncertain future events, then outlines risk management as the company’s process for identifying, measuring, and managing risks. It explains that risk profiles differ by company size, geography, growth phase, business model, and financing structure, and further vary across industries (e.g., financial, manufacturing, technology). The chapter enumerates major risk types including business, financial, credit, liquidity, exchange rate, interest rate, market, investment, reputation, health & safety, political, regulatory, legal & compliance, technology, environmental, fraud, intellectual property, probity, and entrepreneurial risk, followed by core terminology such as risk awareness, risk assessment, risk management, and risk appetite.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages13

Reading Time33 min

Chapter 8 Risk Management Introduction Introduction to Risk ▪ Risk means exposure to adverse consequences due to any uncertain event in future ▪ Risk management means how risks are identified, measured and managed by the company ▪ Risks varies from company to company, depending on: 􀀦 Size of the company (small, medium, large) 􀀦 Geographical location / region (single country, multinational, law and order, economy) 􀀦 Growth phase of the company (setup phase, growth phase, maturity phase) 􀀦 Business model / strategies (physical, online) 􀀦 Financing structure (capital, loan financing, gearing) ▪ Risks also varies from industry to industry. For e.g. banks are more exposed to financial risks and manufacturing organizations are more exposed to health & safety risks. Industry risks depends on: 􀀦 Nature of product and industry ([e.g. financial](e.g. financial) industry vs manufacturing industry) 􀀦 Investment (e.g. capital-intensive industry) 􀀦 Regulations (e.g. higher laws for banks) 􀀦 Ecological aspects (e.g. oil & gas industry) 􀀦 Technology (hi-tech industry) Various Types of Risks ▪ Business Risk Risk that threatens the survival of the whole business and can lead to going concern issue. They can arise from many sources, but mainly due to wrong strategies, decision or business model. ▪ Financial Risk Risk of reduction in revenue or profitability of the company or adverse effect from the way the business is financially structured (e.g. high gearing), debt financing and management of working capital and cash flows. ▪ Credit Risk Risk that customers fail to pay their dues on time. ▪ Liquidity Risk Risk that company does not have sufficient cash to pay off its current liabilities. This mainly arises from bad working capital management. ▪ Exchange Rate Risk Risk of adverse movement in foreign currencies in which the organization deals with. For e.g. if it is importing raw material in foreign currency or a foreign customer owes money in foreign currency. ▪ Interest Rate Risk Risk of adverse changes in interest rates on borrowings or interest rates on investments / deposits ▪ Market Risk Risk of losses from capital markets from adverse changes of share prices of the company, e.g. difficulty in raising capital to fund expansion plans ▪ Investment Risk Risk that the value of investment may fluctuate adversely ▪ Reputation Risk Risk of harm to organization’s image, brand, goodwill or reputation including negative publicity and adverse public sentiments ▪ Health & Safety Risk Risk of harm, injury, disability, death or adverse health effects on people (e.g. employees, customers, society) due to the operations of the company ▪ Political Risk Risk of government instability or higher intervention in business activities ▪ Regulatory Risk Risk of adverse changes in laws and regulations directly or indirectly affecting company operations ▪ Legal and Compliance Risk Risk of breaching

Jul 17, 2026

Upload by Violet