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Business risk and financial risk
The document discusses different types of business and financial risk. Business risk includes strategic, financial, operational, and compliance risk. Financial risk considers how business risk correlates with the level of financial risk, which can be low, high, or a balanced combination. The document outlines steps for risk management, including risk identification, assessment, prioritization, and strategies such as avoidance, reduction, transfer, and retention. Various techniques are provided for analyzing and mitigating risk, such as sensitivity analysis and sequential investment decisions.
In this document
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Introduction to business risks and financial risks, emphasizing their unexpected nature and potential negative impacts.
Categories of risks including business risk, non-business risk, and financial risk.
Details on business risk types: Strategic, Financial, Operational, and Compliance risks.
An emphasis on financial risk, detailing its importance in business contexts.
Relationship between business risk and financial risk across different groups, highlighting balance.
Steps in risk management, including identification, assessing vulnerability, and prioritization.
Various strategies for managing risks: avoidance, reduction, transfer, and retention.
Techniques used in risk analysis including payback, discount rates, and sensitivity analysis.
Other methods to manage risk like cost reduction, pricing strategies, and use of financial instruments.
Closing remarks and gratitude towards the audience.
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Business risk and financial risk
- 1. BUSINESS RISK ANDFINANCIAL RISK
- 2. • UNEXPECTED •MOSTLY NEGATIVE • ACTUALS DIFFERENT THAN EXPECTED • LOSING SOME OR ALL ORIGINAL INVESTMENT
- 3. TYPES OF RISK BUSINESS RISK NON BUSINESS RISK FINANCIAL RISK
- 4. BUSINESS RISK 1.•STRATEGIC RISK 2. •FINANCIAL RISK 3. •OPERATIONAL RISK 4. •COMPLIANCE RISK
- 5.
- 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. RISK MANAGEMENT RISK IDENTIFICATION ASSESSING VULNERABILITY PRIORITISATION
- 8. STRATEGIES RISK AVOIDANCE RISK REDUCTION RISK TRANSFER RISK RETENTION
- 9. TECHNIQUES • Payback • Risk Adjusted Discount Rate( Risk free rate + Risk premium • Sensitivity Analysis • Scenario Analysis • Sequential Investment Decisions
- 10. Other Methods •Reduction in Fixed cost(operating leverage) • Pricing Strategy • Financial leverage(because of debt) • Insurance • Strategic Alliance • Derivatives(hedging, speculation)
- 11.