Transferable risk and Transformation: Difference between pages

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Risks can usefully be classified as 'transferable' or 'non-transferable'.
1.  ''Financial instruments - financial risks - risk management.''


Transferable risks are those which can be transferred to someone else, at a price.
The changing of one dimension of financial risk into another.


For example, a short-term ''foreign exchange swap'' temporarily transforms short-term borrowings - or deposits - from one currency into another.


Ways of transferring these risks include hedging with risk management products, or passing the risk to an insurer.  
Other examples of this kind of transformation include ''interest rate transformation'' and ''maturity transformation.''


In these ways and others, we can remove transferable risks from our organisation, if we choose to.


However, risks can only be transferred where there is a market for them and not all risks are transferable.
2''Change management - structural change.''
   


:<span style="color:#4B0082">'''''Example: Transferable risk'''''</span>
Substantial changes expected to be long-term.


:An exporter sells to a customer in another country, in foreign currency.
In this sense, transformation is usually planned for, and expected to be beneficial.


:The exporter has a transferable foreign exchange risk on the domestic currency equivalent of the future sales receipt.  
Examples include ''business transformation'' and ''treasury transformation''.


:The exporter can eliminate this risk by entering into a forward foreign exchange contract with a bank, effectively fixing the domestic currency equivalent of the receipt. What was initially the exporter's foreign exchange risk has now become the bank's risk.


3.  ''Working effectively with others.''


:Naturally the bank will price the foreign exchange transaction so that it earns an appropriate reward for accepting and managing the risk transferred to it.  
Fundamental and positive shifts in people's habitual ways of doing things.
 
For example, in ''transformational coaching.''
 
 
4.  ''Financial maths.''
 
The systematic conversion of one item or distribution into another.
 
For example, transforming between a ''normal distribution'' and a ''standardised normal distribution''.




== See also ==
== See also ==
* [[Committed risk]]
* [[Borrowing]]
* [[Non-transferable risk]]
* [[Business transformation]]
*[[Collateral transformation]]
* [[Currency]]
* [[Deposit]]
* [[Finance transformation]]
* [[Financial instrument]]
* [[Financial risk]]
* [[Foreign exchange swap]]
* [[Interest rate transformation]]
* [[Maturity transformation]]
* [[Normal distribution]]
* [[Risk management]]
* [[Risk management]]
* [[Uncommitted risk]]
* [[Short term]]
* [[Standardised normal distribution]]
* [[Transformational coaching]]
* [[Treasury transformation]]


[[Category:Financial_risk_management]]
[[Category:The_business_context]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]
[[Category:Treasury_operations_infrastructure]]

Revision as of 09:18, 28 September 2022

1. Financial instruments - financial risks - risk management.

The changing of one dimension of financial risk into another.

For example, a short-term foreign exchange swap temporarily transforms short-term borrowings - or deposits - from one currency into another.

Other examples of this kind of transformation include interest rate transformation and maturity transformation.


2. Change management - structural change.

Substantial changes expected to be long-term.

In this sense, transformation is usually planned for, and expected to be beneficial.

Examples include business transformation and treasury transformation.


3. Working effectively with others.

Fundamental and positive shifts in people's habitual ways of doing things.

For example, in transformational coaching.


4. Financial maths.

The systematic conversion of one item or distribution into another.

For example, transforming between a normal distribution and a standardised normal distribution.


See also