Uncommitted risk: Difference between revisions
imported>Doug Williamson (Expand the stub. Source: MCT 4.1.3 page 12, March 2012.) |
imported>Doug Williamson (Restructured layout and rationalised use of firm/organisation) |
||
| (One intermediate revision by the same user not shown) | |||
| Line 1: | Line 1: | ||
A risk to which an organisation is not contractually committed. | A risk to which an organisation is not contractually committed. | ||
Uncommitted risks can be defined as those potential transactions which can be anticipated as part of the organisation's business. The organisation might not be contractually committed to such transactions but it is very likely that they will occur. | |||
'''Example''' | |||
Such risks could include: | |||
* the next renegotiation with regard to raw material purchases (e.g. aircraft fuel), even if some way in the future; | |||
* the next product launch, such as new car model in 5 to 7 years’ time. | |||
The identification of such uncommitted risks requires a detailed analysis of the business and an understanding of its future growth and development plans. These risks can be viewed as strategic or economic in that they affect | Uncommitted risk also includes anticipated future currency inflows from sales, or currency outflows for raw material purchases and anticipated financial flows such as interest payments, dividends and tax payments. | ||
One off transactions such as an acquisition could also be considered and future capital expenditure should be included, as all organisations need to invest for the future. | |||
The identification of such uncommitted risks requires a detailed analysis of the business and an understanding of its future growth and development plans. These risks can be viewed as strategic or economic in that they affect future profitability and perhaps viability. | |||
| Line 14: | Line 21: | ||
* [[Committed risk]] | * [[Committed risk]] | ||
* [[Non-transferable risk]] | |||
* [[Transferable risk]] | |||
[[Category:Financial_risk_management]] | [[Category:Financial_risk_management]] | ||
Latest revision as of 09:29, 30 May 2015
A risk to which an organisation is not contractually committed.
Uncommitted risks can be defined as those potential transactions which can be anticipated as part of the organisation's business. The organisation might not be contractually committed to such transactions but it is very likely that they will occur.
Example
Such risks could include:
- the next renegotiation with regard to raw material purchases (e.g. aircraft fuel), even if some way in the future;
- the next product launch, such as new car model in 5 to 7 years’ time.
Uncommitted risk also includes anticipated future currency inflows from sales, or currency outflows for raw material purchases and anticipated financial flows such as interest payments, dividends and tax payments.
One off transactions such as an acquisition could also be considered and future capital expenditure should be included, as all organisations need to invest for the future.
The identification of such uncommitted risks requires a detailed analysis of the business and an understanding of its future growth and development plans. These risks can be viewed as strategic or economic in that they affect future profitability and perhaps viability.
