DIO and Operational risk: Difference between pages

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imported>Doug Williamson
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Days Inventory Outstanding.
Operational risk is the risk of adverse effects resulting from inadequate or failed internal processes, people and systems and / or external events such as adverse changes to the economic environment.  


A working capital management ratio calculated by dividing inventory outstanding at the end of a time period by the average daily cost of goods sold for the period.
Investors in companies generally expect the Board to mitigate or minimise these risks, to ensure that they cause as little harm as possible to the organisation.
For example: a company holds on average £30,000 of stock over a year. It sells £300,000 of goods per annum. The DIO is:
 
30,000/300,000*365 = 36.5
 
A lower the number of days is usually considered desirable because it is a quick measure of the amount of stock held although the business must gauge the amount of stock required to meet customers’ delivery expectations.
 
Also known as inventory days.




== See also ==
== See also ==
* [[Cost of goods sold]]
* [[Business risk]]
* [[Creditors]]
* [[Big data]]
* [[DPO]]
* [[Financial risk]]
* [[DSO]]
* [[Guide to risk management]]
* [[Inventory]]
* [[Legal risk]]
* [[Operating cycle]]
* [[Market risk]]
* [[Payables management]]
* [[Unrewarded risk]]
* [[Rewarded risk]]


[[Category:Technical_skills]]
[[Category:Manage_risks]]
[[Category:Context_of_treasury]]
[[Category:Corporate_financial_management]]

Revision as of 09:02, 26 October 2015

Operational risk is the risk of adverse effects resulting from inadequate or failed internal processes, people and systems and / or external events such as adverse changes to the economic environment.

Investors in companies generally expect the Board to mitigate or minimise these risks, to ensure that they cause as little harm as possible to the organisation.


See also