Discounted cash flow and Operational risk: Difference between pages

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(DCF). A process of discounting cash flows that are expected in the future to make them comparable in value with cash flows received today.
''Risk identification and management.''


This process is widely used in investment appraisal, where the rate used to discount with is a measure of the appropriately risk adjusted cost of capital.
(OR).


Where the sum of discounted future positive cash flows (inflows) is calculated, this is often referred to as the total ''Present value'' of those cash flows.
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.  


Where the present value of future expected cash flows is netted against discounted investment outflows, this is referred to as the ''Net present value'' of the investment proposal.
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.
 
 
Operational risks include - among others:
*Operations risk;
*Systems risk;
*Legal risk; and
*Weather risk.
 
 
Also known as ''operational exposure.''


Discounted cash flow techniques include Net Present Value (NPV) analysis and Internal Rate of Return (IRR) analysis.


== See also ==
== See also ==
* [[Discount rate]]
* [[Basic indicator approach]]
* [[Incremental cash flows]]
* [[Business risk]]
* [[Internal rate of return]]
* [[Big data]]
* [[Investment appraisal]]
* [[Credit risk]]
* [[Net present value]]
* [[Exposure]]
* [[Present value]]
* [[Financial risk]]
* [[Time value of money]]
* [[General Data Protection Regulation]]
 
* [[Guide to risk management]]
* [[Institute of Risk Management]]
* [[Legal risk]]
* [[Market risk]]
* [[Operations risk]]
* [[Opportunity risk]]
* [[Performance risk]]
* [[Reputational risk]]
* [[Rewarded risk]]
* [[Risk]]
* [[Standardised Approach]]
* [[Systems risk]]
* [[Transaction risk]]
* [[Treasury risk]]
* [[Unrewarded risk]]
* [[Weather risk]]


==External links==
[[Category:Manage_risks]]
[http://www.treasurers.org/node/8445 Masterclass; Discounted cash flow, The Treasurer, October 2012]

Latest revision as of 03:24, 30 March 2024

Risk identification and management.

(OR).

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.


Operational risks include - among others:

  • Operations risk;
  • Systems risk;
  • Legal risk; and
  • Weather risk.


Also known as operational exposure.


See also

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