Join Jason Schenker for an in-depth discussion in this video Financial solutions: Interest rate swaps, part of Finance Foundations: Risk Management.
- [Instructor] Have you ever had a risk…that you wish you could exchange or swap with someone else?…Well that's exactly what financial swaps…are designed to do for companies.…There are a number of swaps for financial markets,…but the most commonly used ones aren't interest rate swaps.…Interest rate increases can have…a significant negative impact on a company's cash flow,…hurting its ability to be profitable.…Interest rates going up is bad for business.…If you touch the money in your corporation,…you will come face to face with the realities…of interest rate swaps, at some point in your career.…
Almost every corporation uses or considers using…interest rate swaps to provide consistent cash flow…related to its debt payments.…This is because companies just like you…don't like it when you owe someone money,…and it's a surprise that you owed them more than you plan.…To understand how interest rates swaps work,…we first need to talk about corporate debt,…which is comprised of two parts,…a company-specific interest rate…
Jason Schenker of Prestige Economics discusses nine types of corporate risk, including financial and nonfinancial risks. He explains the difference between direct risks that companies face constantly, as well as indirect risks that usually come from vendors, competitors, and counterparties. Then he covers how risks are typically resolved, either by elimination (divestiture or acquisition), transfer (hedging or insuring), offset (creating a natural hedge), or ownership (keeping the exposure). Finally, he reviews how corporations can actively measure and monitor risk by appointing dedicated risk managers, officers, and committees.
- Understanding risk in corporations
- Risk management process
- Nine different types of corporate risks
- Financial market risks
- Direct and indirect risks
- Risk management solutions
- How corporations actively manage risk