Learn about and see examples of the three main kinds of financial market risks, including foreign exchange risk, interest rate risk, and commodity risk management. Additionally, learn about some of the similarities and differences of the three main categories of financial market risks.
- There are three main financial market risks…that can significantly impact a company's bottom line,…interest rates, currencies, and commodity prices.…When these markets move,…a company's bottom line can take a hit…and these markets are almost always…bigger than the companies they impact…because they can be driven…by Central Bank Policy, OPEC, and the weather.…Interest rate, currency, and commodity price risks…are important for the financial stability of a company.…
Understanding them will make you…interesting at corporate parties…and knowing how these risks impact your business…can have a valuable impact on your bottom line.…Interest rates directly impact the price of money.…When interest rates rise, the cost of money goes up…which makes it more expensive for a company to do business.…This change is well out of the control of companies…as Central Banks determine underlying policy rates…which are independent of credit considerations.…
Higher interest rates make the debt a company has…more expensive to finance,…
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