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Business risk and financial risk

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Business risk and financial risk

  1. 1. BUSINESS RISK AND FINANCIAL RISK
  2. 2. • UNEXPECTED • MOSTLY NEGATIVE • ACTUALS DIFFERENT THAN EXPECTED • LOSING SOME OR ALL ORIGINAL INVESTMENT
  3. 3. TYPES OF RISK BUSINESS RISK NON BUSINESS RISK FINANCIAL RISK
  4. 4. BUSINESS RISK 1. •STRATEGIC RISK 2. •FINANCIAL RISK 3. •OPERATIONAL RISK 4. •COMPLIANCE RISK
  5. 5. FINANCIAL RISK
  6. 6. CORRELATION BETWEEN BUSINESS RISK & FINANCIAL RISK Well Balanced Group A Dangerous Group Conservative Group Well Balanced Group B B U S I N E S S R I S K H I G H LOW HIGH F I N A N C I A L R I S K L O W
  7. 7. RISK MANAGEMENT RISK IDENTIFICATION ASSESSING VULNERABILITY PRIORITISATION
  8. 8. STRATEGIES RISK AVOIDANCE RISK REDUCTION RISK TRANSFER RISK RETENTION
  9. 9. TECHNIQUES • Payback • Risk Adjusted Discount Rate( Risk free rate + Risk premium • Sensitivity Analysis • Scenario Analysis • Sequential Investment Decisions
  10. 10. Other Methods • Reduction in Fixed cost(operating leverage) • Pricing Strategy • Financial leverage(because of debt) • Insurance • Strategic Alliance • Derivatives(hedging, speculation)
  11. 11. Thank you !!

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