Risk management is a process for identifying, assessing, and prioritizing risks of different kinds. Once the risks are identified, the risk manager will create a plan to minimize or eliminate the impact of negative events. A variety of strategies is available, depending on the type of risk and the type of business. There are a number of risk management standards, including those developed by the Project Management Institute, the International Organization for Standardization (ISO), the National Institute of Science and Technology, and actuarial societies.
There are many different types of risk that risk management plans can mitigate. Common risks include things like accidents in the workplace or fires, tornadoes, earthquakes, and other natural disasters. It can also include legal risks like fraud, theft, and sexual harassment lawsuits. Risks can also relate to business practices, uncertainty in financial markets, failures in projects, credit risks, or the security and storage of data and records.
The idea behind using risk management practices is to protect businesses from being vulnerable. Many business risk management plans may focus on keeping the company viable and reducing financial risks. However, risk management is also designed to protect the employees, customers, and general public from negative events like fires or acts of terrorism that may affect them. Risk management practices are also about preserving the physical facilities, data, records, and physical assets a company owns or uses.
While a variety of different strategies can mitigate or eliminate risk, the process for identifying and managing the risk is fairly standard and consists of five basic steps. First, threats or risks are identified. Second, the vulnerability of key assets like information to the identified threats is assessed. Next, the risk manager must determine the expected consequences of specific threats to assets. The last two steps in the process are to figure out ways to reduce risks and then prioritize the risk management procedures based on their importance.
There are as many different types of strategies for managing risk as there are types of risks. These break down into four main categories. Risk can be managed by accepting the consequences of a risk and budgeting for it. Another strategy is to transfer the risk to another party by insuring against a particular, like fire or a slip-and-fall accident. Closing down a particular high-risk area of a business can avoid risk. Finally, the manager can reduce the risk’s negative effects, for instance, by installing sprinklers for fires or instituting a back-up plan for data.
Having a risk management plan is an important part of maintaining a successful and responsible company. Every company should have one. It will help to protect people as well as physical and financial assets
The study of how the government (or public) sector pays for (or finances) expenditures through taxes and borrowing. Governments produce or provide valuable goods and services, such as education, security, and transportation. They pay for these goods by collecting taxes or, if taxes fall short, by borrowing through the financial markets. Public finance adapts and applies the fundamental microeconomic theory of markets to the public sector and government activity. In particular, this area of study analyzes the efficiency of taxes and the market failure of public goods. Public finance is also key to the study of government stabilization policies that address the inflation and unemployment problems of business cycles.
Personal finance is the application of principals of finance to the decisions of an individual or family. In layman’s terms it is the process of controlling your money and making informed decisions to keep your finances in check and yourself out of debt. Having the ability to perform personal financial duties is an essential skill for every American.
You should be able to do basic things like create a budget, balance a check book and know when you are spending too much money each month. By learning these critical skills you will keep yourself out of debt, have the ability to retire at an earlier age and live a stress free life.
Once you grasp the concepts associated with personal finance you will find it that much easier to keep yourself out of debt. No longer will you be over spending each month creating more debt for yourself you will be able to manage the current debt that you do have.
With personal finance skills you will be able to see how a credit card’s interest rate is affecting the amount of money you owe each month and why it is important that you pay more than just the minimum payment on your credit cards so that you may start to pay off the actual debt you owe and not just the interest.
A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation. A merger is not the same as a consolidation, in which two corporations lose their separate identities and unite to form a completely new corporation.
International financial management deals with the financial decisions taken in the area of international business. The growth in international business is, first of all, evident in the form of highly inflated size of international trade. In the immediate post-war years, the general agreement on the Trade and Tariffs was set up in order to boost trade. It axed the trade barriers significantly over the years, as a result of which international trade grew manifold. Naturally, the financial involvement of the trader's exporters and importers and the quantum of the cross country transactions surged significantly. All this required proper management of international flow of funds for which the study of International Financial Management came to be indispensable.
Not unexpectedly, the second half of the twentieth century witnessed the emergence, and fast expansion, of multinational corporations. Normally, with the growth of international trade, the products of the exporter become mature in the importing countries. When the product becomes mature in the importing countries, the exporter starts manufacturing the product there so as to evade tariff and to supply it at the least cost. Thus it would not be wrong to say that the emergence of the multinational companies was the by-product of the expansion in world trade. There were some countries in the developing world too which were liberal in hosting the multinational companies. They imported technology on a big scale and built up their own manufacturing base. As a result, their own companies went international. Thus multinational company's emergent not only in developed countries but also in the developing world and because of their operation the cross country flow of funds increased substantially. The two way flow of funds, outward in the form of investment and inward in the form of repatriation divided, royalty, technical service fees, etc., required proper management and so the study of International Finance Management become a real necessity.
With growing operation of Multinational companies, a number of complexities arose in the area of their financial decisions. Apart form the considerations of where, when and how much to invest, the decision concerning the management of working capital among their different subsidiaries and the parent units become more complex especially because the basic polices varied from one Multinational companies to the other. Those Multinational companies that were more interested in maximizing the value of global wealth adopted a centralized approach while those not interfering much with their subsidiaries believed in a decentralized approach.
The second half of the twentieth century has also experienced a vast magnitude of lending y international and regional development asks and different governmental and non-governmental agencies. The movement of funds mostly to the developing world and the reverse movement of funds in form of interest and amortization payments needed proper management. Besides, there were big changes in the character of the international financial market with the emergence of Euro banks and offshore banking centre and of various instruments, such as Euro bonds, Euro notes and Euro commercial papers. The nature of the movement of funds become so complex that proper management become a necessity and the study of International Finance Management become highly relevant. In fact, International Finance Management suggests the most suitable technique to be applied at a particular moment and in a particular case in order to hedge the risk.
A financial market is a market in which people and entities can trade financial securities, commodities, and other fungible items of value at low transaction costs and at prices that reflect supply and demand. Securities include stocks and bonds, and commodities include precious metals or agricultural goods.
There are both general markets (where many commodities are traded) and specialized markets (where only one commodity is traded). Markets work by placing many interested buyers and sellers, including households, firms, and government agences, in one "place", thus making it easier for them to find each other. An economy which relies primarily on interactions between buyers and sellers to allocate resources is known as a market economy in contrast either to a command economy or to a non-market economy such as a gift economy.
It examines the elements of entrepreneurial finance, focusing on technology-based start-up ventures and the early stages of company development. The course addresses key questions which challenge all entrepreneurs: how much money can and should be raised; when should it be raised and from whom; what is a reasonable valuation of the company; and how should funding, employment contracts and exit decisions be structured. It aims to prepare students for these decisions, both as entrepreneurs and venture capitalists. In addition, the course includes an in-depth analysis of the structure of the private equity industry.
If the objective function in corporate finance is to maximize firm value, it follows that firm value must be linked to the three corporate finance decisions outlined—investment, financing, and dividend decisions. The link between these decisions and firm value can be made by recognizing that the value of a firm is the present value of its expected cash flows, discounted back at a rate that reflects both the riskiness of the projects of the firm and the financing mix used to finance them. Investors form expectations about future cash flows based on observed current cash flows and expected future growth, which in turn depend on the quality of the firms projects (its investment decisions) and the amount reinvested back into the business (its dividend decisions). The financing decisions affect the value of a firm through both the discount rate and potentially through the expected cash flows.
This neat formulation of value is put to the test by the interactions among the investment, financing, and dividend decisions and the conflicts of interest that arise between stockholders and lenders to the firm, on one hand, and stockholders and managers, on the other. We introduce the basic models available to value a firm and its equity, and relate them back to management decisions on investment, financial, and dividend policy. In the process, we examine the determinants of value and how firms can increase their value.
The field of behavioral finance uses a broad social science perspective to study the behavior of financial markets. Methods that originate in psychology are used as research tools, along with traditional finance research methods. The research methods in finance most in use before the advent of behavioral finance did not then seem to lend themselves to the application of psychology. Models of individual optimization were almost exclusively based on the assumption of perfectly rational individual behavior. Many of the predictions of these models were described as representing the notion that financial markets were “efficient,” that is, that prices in financial markets accurately incorporate all publicly available information. Studies of the efficiency of financial markets often reported apparent contradictions of efficient markets in the literature, but, before the development of the theory of behavioral finance, their results were hard to interpret, there being at that time no well-delineated alternative hypothesis to compare with the efficient markets hypothesis.
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