CAN RISK MANAGEMENT ADD VALUE?

1995 ◽  
Vol 35 (1) ◽  
pp. 740
Author(s):  
D. C. Shimko
Keyword(s):  
Risk Management ◽  
Capital Structure ◽  
Risk Reduction ◽  
Quantitative Model ◽  
Management Decision ◽  
Imperfect Markets ◽  
Corporate Risk Management ◽  
Structure Program ◽  
Corporate Risk ◽  
The Impact

Proper risk management reduces risk, but does it necessarily add value for corporate shareholders? Modigliani and Miller argued in 1958 that the answer is 'no' in a perfect market setting. How risk management adds value in an imperfect markets setting is shown. In particular, the corporate risk management decision is linked to the leverage decision to measure the impact of risk reduction on shareholder value. A quantitative model is developed and is applied to five public commodity companies to calculate the value increase due to optimal risk management and leverage. Finally, the practical aspects of implementing a joint risk management and capital structure program are discussed.

scholarly journals CORPORATE RISK MANAGEMENT PRACTICES IN BOSNIA AND HERZEGOVINA COMPANIES

2017 ◽  
pp. 198-216
Keyword(s):  
Risk Management ◽  
Bosnia And Herzegovina ◽  
Management Practices ◽  
Cash Flows ◽  
Business Environment ◽  
Risk Tolerance ◽  
Corporate Risk Management ◽  
Modern Business ◽  
Corporate Risk ◽  
The Impact

Over the last few decades, corporate risk management has become a very important element of management to financial and non-financial companies. In the modern business environment every company is exposed to corporate risk. It can be said that the way to deal with the corporate risk has become a crucial competitive advantage for enterprises in all industry sectors. Reducing the impact of corporate risks such as financial risks, operational risks, strategic and hazardous risks, companies can reduce the volatility of cash flows, thus reducing the expected costs of financial difficulties and agency costs and increase the present value of expected future cash flows. Also, by reducing the volatility of cash flows company increases the likelihood of securing sufficient quantities of its own funds for planned investments, eliminating the need to cut profitable projects or bear the transaction costs of expensive external financing. The paper presents the results of research on the practice of corporate risk management in large non-financial companies in Bosnia and Herzegovina. Data on corporate risk management were collected using a questionnaire. The questionnaire was sent to 120 companies from Bosnia and Herzegovina, where 66 companies provided the required answers to the questions on the basis of which is ultimately formed variable risk that indicates the level of implementation of corporate risk management. Based on the study on the management of corporate risk in Bosnia and Herzegovina it can been concluded that most of the analyzed companies manage corporate risk, at least in certain segments. The largest number of companies actively controls only part of the overall exposure to corporate risk, or are considering the implementation of the complete process of corporate risk management. However, there are still a significant number of companies do not even manage corporate risk, and with them the risk management is primarily a result of occurred events. Although most of the observed companies monitor risks, it is worth pointing out that even 32% of the companies do not elucidate the risk tolerance, and even 45% of companies did not quantify the risks.

Modeling the Impact of Corporate Risk Management on Firms’ Financial Performance and Sustainable Growth

2022 ◽  
Vol 40 (1) ◽  
Author(s):  
Tanveer Bagh ◽  
Mirza Muhammad Naseer ◽  
Muhammad Asif Khan
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Positive Impact ◽  
Developed Countries ◽  
Business Environment ◽  
Sustainable Growth ◽  
Global Business ◽  
Corporate Risk Management ◽  
Corporate Risk ◽  
The Impact

Growing complexities in the indigence and global business environment, the demand for Corporate Risk Management (CRM) has fostered greatly. Equally, Financial Performance (FP) and Sustainable Growth Rate (SGR) are believed to be vital parameters for assessing any organisation's success. Both FP and SGR are get affected by different risks. Therefore, to the best of our knowledge, this paper is the first endeavour meant to empirically shed light on the Impact of CRM on a firm’s FP and SGR. By taking a sample of 160 listed Non-Financial firms from emerging and developed Countries stocks markets, on the bases of market capitalization, covering a period of 12 years (2007-2018). The CRM index has been constructed by using the Principal Component Analysis technique. Panel data fixed-effect Model applied on the bases of Hausman test. The results articulated that CRM has a significant and positive impact on ROE and SGR in the context of both cases. In contrast, inflation negatively relates to both scenarios, but the size and Gross Domestic Product (GDP) have a positive and significant relationship with ROE and SGR. However, in Pakistan's case, Size and GDP have articulated adverse effect on ROE and SGR.

Do agency conflicts between managers and shareholders affect corporate risk management and financial performance of Saudi firms?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Lamia Jamel ◽  
Hanadi Eid Albogami ◽  
Mazen Abduljahn Abdulaal ◽  
Nuha Ahmed Aljohani
Keyword(s):  
Risk Management ◽  
Financial Performance ◽  
Conflicts Of Interest ◽  
Stock Exchange ◽  
Risk Level ◽  
Agency Conflicts ◽  
Corporate Risk Management ◽  
Content Type ◽  
Corporate Risk ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of agency conflicts between managers and shareholders on corporate risk management and financial performance of Saudi firms listed in the Saudi Stock Exchange Tadawul. Design/methodology/approach To investigate the effect of agency conflicts between managers and shareholders on corporate risk management and financial performance, we use a sample of 180 Saudi firms listed in the Saudi Stock Exchange Tadawul during the period from 2009 to 2018. Econometrically, we employ Vector Autoregressive (VAR) and General Linear Model (GLM) techniques as an appropriate methodology. Findings Our findings show that the risk level of the last year increase the corporate risk management and the performance of Saudi firm. We remark that the separation amongst control and ownership generates agency conflicts amongst managers and shareholders which can affect their behavior in decision-making and performance of the Saudi firms. Thus, the conflicts of interest arise from the differences among the work horizon, the risk assumed, the performance of enterprises, and the level of remuneration desired by the managers and shareholders in the case of Saudi firms. Originality/value The main contributions of our paper prove that the deepen the study of agency costs linked to a shareholding structure through the analysis of monitoring, obligation, and opportunity costs in the Saudi firms.

Corporate risk management and speculative motives

2007 ◽  
Vol 10 (2) ◽  
pp. 47-72
Author(s):  
Gregory Brown ◽  
Zeigham Khokher
Keyword(s):  
Risk Management ◽  
Corporate Risk Management ◽  
Corporate Risk

Interest Rate Cycles and Corporate Risk Management

2009 ◽  
Author(s):  
Peter Christoffersen ◽  
Amrita Nain ◽  
Jaideep S. Oberoi
Keyword(s):  
Risk Management ◽  
Interest Rate ◽  
Corporate Risk Management ◽  
Corporate Risk

Mandatory governance reform and corporate risk management

2021 ◽  
Vol 68 ◽  
pp. 101935
Author(s):  
Ulrich Hege ◽  
Elaine Hutson ◽  
Elaine Laing
Keyword(s):  
Risk Management ◽  
Governance Reform ◽  
Corporate Risk Management ◽  
Corporate Risk

Choices and Best Practice in Corporate Risk Management Disclosure

2007 ◽  
Vol 19 (4) ◽  
pp. 82-93 ◽  
Author(s):  
Ekaterina E. Emm ◽  
Gerald D. Gay ◽  
Chen-Miao Lin
Keyword(s):  
Risk Management ◽  
Best Practice ◽  
Corporate Risk Management ◽  
Corporate Risk
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