Business risk and Hard money: Difference between pages

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==== Business risk generally ====
1. ''Currencies - gold standard - fiat currencies.''
   


In its broadest sense, business risk means the set of risks taken by a business in choosing to operate in a commercially competitive environment, launching a new product or investing in new equipment.  
In relation to currencies, Hard money meant that the currency was based on a fixed amount of a valuable physical asset, for example gold or silver.


These decisions are risky and they may or may not result in the expected reward. In extreme cases this risk may even result in the failure of the wider business. Many firms attempt to limit the scale of this risk by restricting the range of their business activities to their core competences.
Gold was the most commonly referenced asset latterly, known as the Gold standard.


Most countries abandoned the gold standard for their currencies during the 20th century.


==== Business risk in the Capital Asset Pricing Model ====
Fiat currencies are the - almost universal - alternative to hard money.


In the capital asset pricing model (CAPM) 'business risk' means the component of total risk which arises from the business operations of a company which has issued shares or other securities.


Business risk in the CAPM is measured by the ungeared beta of the business.
2. ''Funding - reliability or directness.''


Risk in this CAPM context is defined narrowly to mean the variability of the company's share returns compared with the returns of the market as a whole, as if the company had no debt.
Sources of funding that are either:


*Considered more reliable;
*More strongly linked with a particular purpose; or
*Both.




==== Business risk for financial regulatory purposes ====
3. ''Lending and borrowing - collateral.''
   
 
Any potential impairment of the regulated entity's financial position:
#Resulting from a decline in revenues
#Or an increase in expenses
#Leading to a loss
#That must be charged against capital.
 


Hard money loans are ones secured against a physical asset, often a residential property.




== See also ==
== See also ==
* [[Asset beta]]
* [[Bretton Woods]]
* [[Beta]]
* [[Collateral]]
* [[Capital asset pricing model]]
* [[Fiat currency]]
* [[Commercial risk]]
* [[Foreign exchange]]
* [[Equity risk]]
* [[Funding]]
* [[Financial risk]]
* [[Gold standard]]
* [[Operational risk]]
* [[Hard currency]]
* [[Risk taxonomy]]
* [[Monetary policy]]
* [[Ungeared beta]]
* [[Money]]
 
* [[Pound]]
__NOTOC__


[[Category:Accounting,_tax_and_regulation]]
[[Category:The_business_context]]
[[Category:Corporate_finance]]
[[Category:Corporate_finance]]
[[Category:Compliance_and_audit]]
[[Category:Intercompany_funding]]
[[Category:Investment]]
[[Category:Long_term_funding]]
[[Category:Identify_and_assess_risks]]
[[Category:Manage_risks]]
[[Category:Manage_risks]]
[[Category:Risk_frameworks]]
[[Category:Risk_reporting]]
[[Category:Cash_management]]
[[Category:Financial_products_and_markets]]
[[Category:Liquidity_management]]
[[Category:Trade_finance]]

Revision as of 13:57, 11 June 2021

1. Currencies - gold standard - fiat currencies.

In relation to currencies, Hard money meant that the currency was based on a fixed amount of a valuable physical asset, for example gold or silver.

Gold was the most commonly referenced asset latterly, known as the Gold standard.

Most countries abandoned the gold standard for their currencies during the 20th century.

Fiat currencies are the - almost universal - alternative to hard money.


2. Funding - reliability or directness.

Sources of funding that are either:

  • Considered more reliable;
  • More strongly linked with a particular purpose; or
  • Both.


3. Lending and borrowing - collateral.

Hard money loans are ones secured against a physical asset, often a residential property.


See also

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