Risk Management Essay example

4096 Words Mar 9th, 2015 17 Pages
1

CHAPTER 1

INTRODUCTION

Risk management structure should be well thought-out, as well as a cultural fit and sustainable. (Smiechewicz, 2001) Uncertainty is not measurable. Risk is. - Frank Knight,

Risk, Uncertainty and Profit (1921)

1.1

Introduction

Success in business, to a certain degree, requires owners and managers to take calculated risks. The most successful business is usually managed by people who know when to push forward and when to pull back, when to buy and when to sell, when to stand firm and when to compromise. The successful company is managed by people who understand what risk in business is, and how this risk should be managed and mitigated. Risk is an undeniable reality of doing business today,
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Financial risk management in international accounting aims to minimise risk of loss from unexpected changes in the prices of commodities and equities, or changes in interest and inflation rates. Intelligent risk management can help a company stabilise cash flows, reduce its risk of insolvency, manage taxes better, and focus more effectively and efficiently on its primary business risks. Effective risk management allows corporations and their lenders to weather difficult situations and be able to survive the fall-out of loan losses or corporate accounting scandals (Adler 2002). Intelligent risk management at the level of international and multinational business operations must take into account a myriad of factors, from the technical and the theoretical to the political and practical. An effective international accountant, such as a CFO of a multinational corporation, must comprehend the immense complexity of financial risk management. to recognize the relationships and correlations between various risk management tools, techniques, and systems. These tools incorporate both

3 qualitative and quantitative analysis and the efficacy of individual tools affect the overall success of a company’s risk management program (Rahl & Lee 2000). With the objective of

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