SU5 - Micro Factors - Financial Risk Management Flashcards
1
Q
Define Financial Risk.
A
It is the exposure to adverse events that erode profitability.
This may include
- Poor investment decisions
- Failure of financial systems.
2
Q
Provide the 9 sources of Financial Risk.
A
- Liquidity Risk
- Credit Risk
- Interest rate Risk
- Inflation on investment projects
- Currency Risk
- Funding Risk
- Foreign Investment Risk
- Derivatives Risk
- Outsourcing Risk
3
Q
What are the benefits of Financial Risk Management?
A
- It improves financial planning and management.
- It facilitates robust investment decisions.
- Informs hedging solutions
- Encourages constant market & economy monitoring
- Encourages practice of due diligence
