Uncommitted risk: Difference between revisions
imported>Doug Williamson (Expand the stub. Source: MCT 4.1.3 page 12, March 2012.) |
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Revision as of 12:06, 20 May 2015
A risk to which an organisation is not contractually committed.
Uncommitted risks can be defined as those potential transactions which can be anticipated as part of the firm's business. The firm might not be contractually committed to such transactions but it is very likely that they will occur.
Such risks may include the next renegotiation with regard to raw material purchases (e.g. aircraft fuel), even if some way in the future, the next product launch, such as new car model in 5 to 7 years’ time.
It also includes anticipated future currency inflows from sales, or currency outflows for raw material purchases and anticipated financial flows such as interest payments, dividends and tax payments. One off transactions such as an acquisition could also be considered and future capital expenditure should be included, as all firms need to invest for the future.
The identification of such uncommitted risks requires a detailed analysis of the business and an understanding of its future growth and development plans. These risks can be viewed as strategic or economic in that they affect the future profitability and perhaps viability of a firm.
