In this video, examine the upside and downside of risks corporations face, and look at the purpose of risk management.
- Businesses make money because they take risks,…but if they take on too much risk,…they could go out of business.…A great example of this was the energy company Enron.…It was worth billions of dollars,…but the company took on too much risk…and one day, the company was gone.…There is an important balance that corporations…have to strike between upside and downside risks,…and this is one of the core foundations…of corporate financial risk management.…Managing risks is important for making…a business successful and stable.…
In this video, we're going to talk about how and why…risks are important for businesses.…Upside risks present opportunities for profits…but downside risks present the potential for losses.…Effective risk management is important for helping companies…capture both the upside opportunities…and limit downside risks.…In the same way that a prospector in the gold rush era…would have bought a pickax to mine for gold,…there was risk involved.…Maybe at the end of the day, he would have found gold,…or maybe at the end of the day, he would just have a pickax.…
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