Business risk and Prompt Payment Code: Difference between pages

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imported>Doug Williamson
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imported>Doug Williamson
(Added acronym in line with PPC webpage - http://www.promptpaymentcode.org.uk/)
 
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==== Business risk generally ====
(PPC).


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.  
Prompt payment of suppliers is encouraged or required by a number of initiatives.  


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.
Examples include the UK’s voluntary Prompt Payment Code and the EU’s mandatory Late Payment Directive 2011/7.




==== Business risk in the Capital Asset Pricing Model ====
As an example, signatories to the UK Prompt Payment Code undertake to pay suppliers within a maximum of 60 days (in line with late payment legislation requirements), to work towards adopting 30 days as the norm, and to avoid any practices that adversely affect the supply chain.
 
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.
 
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.
 
 
 
==== Business risk for financial regulatory purposes ====
 
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.
 


Similar codes and legislation have been implemented in a number of jurisdictions.




== See also ==
== See also ==
* [[Asset beta]]
*[[Credit]]
* [[Beta]]
*[[Open account]]
* [[Capital asset pricing model]]
* [[Commercial risk]]
* [[Enterprise risk management]]
* [[Equity risk]]
* [[Financial risk]]
* [[Operational risk]]
* [[Risk taxonomy]]
* [[Ungeared beta]]


__NOTOC__


[[Category:Corporate_finance]]
===Other links===
[[Category:Compliance_and_audit]]
*[http://www.promptpaymentcode.org.uk/ Prompt Payment Code home page]
[[Category:Manage_risks]]

Revision as of 16:04, 8 February 2017

(PPC).

Prompt payment of suppliers is encouraged or required by a number of initiatives.

Examples include the UK’s voluntary Prompt Payment Code and the EU’s mandatory Late Payment Directive 2011/7.


As an example, signatories to the UK Prompt Payment Code undertake to pay suppliers within a maximum of 60 days (in line with late payment legislation requirements), to work towards adopting 30 days as the norm, and to avoid any practices that adversely affect the supply chain.

Similar codes and legislation have been implemented in a number of jurisdictions.


See also


Other links

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