imported>Doug Williamson |
imported>Doug Williamson |
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| 1. ''Corporate finance.''
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| In the corporate finance context, risk refers to the degree to which future returns may vary.
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| Risk is often measured by the standard deviation of forecast returns.
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| It is often estimated by the standard deviation of <u>historic</u> returns, though this process is inherently error-prone when used for <u>forecasting</u> or for risk management purposes.
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| 2. ''Capital asset pricing model.''
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| In the Capital Asset Pricing Model, relevant risk is measured by beta.
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| 3. ''Unknown occurrences.''
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| In a more general sense, risk refers to the unknown (or unknowable) nature of future outcomes involving, for example, market prices or market rates.
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| 4. ''Adverse effects.''
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| Risk can also refer to the possibility of <u>adverse effects</u> resulting from:
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| - Changes in market prices or rates, or
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| - Changes in other general conditions in the market, or
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| - Other economic factors specific to the business or other organisation (such as the failure of a key supplier).
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| 5. ''Opportunity and hazard.''
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| More broadly, risk can refer to the possibility of any event occurring that will have an impact on the achievement of objectives.
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| This includes both the upside opportunity and the downside hazard which could either move us towards or drive us away from achieving our objectives.
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| Risk in this context is measured both in terms of (1) its impact and (2) its likelihood.
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| '''Treasury's role in risk management'''
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| No organisation can eliminate all risk, so risk has to be managed effectively. This is best done through a risk-aware culture.
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| Generally, treasury is about managing risk rather than taking risks.
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| Many risks should be managed. Risk management is a key activity of the treasury function.
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| == See also == | | == See also == |
| * [[Alienation of assets]] | | * [[Standard]] |
| * [[Beta]]
| | * [[Standard Setting Body]] |
| * [[Black swan]]
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| * [[Capital asset pricing model]]
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| * [[Capital risk]]
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| * [[Commercial credit risk]]
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| * [[Commodity risk]]
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| * [[Counterparty risk]]
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| * [[Default]]
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| * [[Delivery risk]]
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| * [[Diversification]]
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| * [[Downside risk]]
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| * [[Effective annual rate]]
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| * [[Financial market risk]]
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| * [[Financial market price risk]]
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| * [[Financial risk]]
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| * [[Guide to risk management]]
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| * [[Insurance]]
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| * [[Legal risk]]
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| * [[Market risk]]
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| * [[Market price risk]]
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| * [[Model risk]]
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| * [[Regulatory risk]]
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| * [[Return]]
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| * [[Risk averse]]
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| * [[Risk management]]
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| * [[Standard deviation]] | |
| * [[Tax risk]]
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| * [[Transfer risk]]
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| * [[Treasury]]
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| | [[Category:Accounting,_tax_and_regulation]] |
| | [[Category:The_business_context]] |
| | [[Category:Identify_and_assess_risks]] |
| | [[Category:Manage_risks]] |
| [[Category:Risk_frameworks]] | | [[Category:Risk_frameworks]] |
| | [[Category:Risk_reporting]] |
