This document summarizes a study examining the impact of financial risk management on company value. It provides background on the increased importance of financial risk management for companies due to globalization and financial instability. It then discusses various financial risk management methods companies use, including identifying risks, risk measurement techniques like decision trees and the Capital Asset Pricing Model, and developing risk management strategies. The study aims to analyze how effective financial risk management may increase company profitability and value.
A comprehensive presentation on the financial risks involved in businesses in general & specifically in banks.
What is Risk?
Generally - Danger, Hazard, Adverse impact, Fear of loss.
Financially-Loss of earnings/capital
May result in incapability of financial institution to meet business goals
Basically there are 4 main risks:
1. Credit Risk
2. Market Risk
3. Liquidity Risk
4. Operational Risk
Risk terminologies, consequences & risk measurement 53,55Anand kumar
Project Specific Risk- this affects only the project under consideration, and may arise from factors specific to the project or estimation error
Competitive Risk- it’s the unanticipated effect on the cash flows in a project of competitor actions. Can be negative or positive
Industry Risk- this is the unanticipated effect on the project cash flows of industry-wide shifts in Technology, changes in laws or in the price of commodity.
Market Risk/ Macro Economic Factors- changes in interest rates, inflation rate, tax policies and the economy
International Risk-changes in exchange rates and political scenarios
COMPARISON OF METHODS FOR THE RECOGNITION OF DERIVATIVE FINANCIAL PRODUCTS WI...IAEME Publication
In the global competition environment,the companies’ areas of usage regarding derivative financial products becamewidespread and these instruments started to take an important place in theliability statements of the businesses. In terms of financial accounting, thecompanies need to reflect the usage of derivative financial products in theirfinancial statements, and in terms of administrative accounting, they searchfor methods that will facilitate the follow-ups for the performance assessmentand decision making procedures regarding the processes of large scalederivatives.
The companies making investments in thederivatives in hopes of risk management or speculation acquire mutual rightsand liabilities through the contracts they make. For the assessment andrecognition of these rights and liabilities, the standards numbered TMS 32, TMS39, TFRS 7 and TFRS 9 were published by the Public Oversight Authority ofTurkey. These standards coincide with the standards published by theInternational Accounting Standards Board (IASB).
In this study, attention is drawn to theassessment and recognition of the derivatives in line with the aforementionedstandards, and alternative solutions are discussed.
Country risk assessment, also known as country risk analysis, is the process of determining a nation's ability to transfer payments. It takes into account political, economic and social factors, and is used to help organisations make strategic decisions when conducting business in a country with excessive risk.
An enormous effort has gone into banking and financial regulatory reform following the recent financial crisis. This presentation is an attempt to:
Describe some key open questions about the relation among stability, growth, and regulatory reform.
Raise some concerns about overemphasis on some instruments and under emphasize on others in the ongoing reform process.
The managers most likely to succeed in today’s business environment, are those who understand how to use budgets as business tools, for departmental and personal success.
Managing Budgets is an informative and practical guide to the essential skills needed.
produce accurate and useful budgets.
Mitigating Currency Risk for Investing in MFIs in Developing CountriesAndrew Tulchin
Working paper exploring methods to overcome a serious risk factor impeding investment in international development. Written by Romi Bhatia, Columbia University SIPA.
A comprehensive presentation on the financial risks involved in businesses in general & specifically in banks.
What is Risk?
Generally - Danger, Hazard, Adverse impact, Fear of loss.
Financially-Loss of earnings/capital
May result in incapability of financial institution to meet business goals
Basically there are 4 main risks:
1. Credit Risk
2. Market Risk
3. Liquidity Risk
4. Operational Risk
Risk terminologies, consequences & risk measurement 53,55Anand kumar
Project Specific Risk- this affects only the project under consideration, and may arise from factors specific to the project or estimation error
Competitive Risk- it’s the unanticipated effect on the cash flows in a project of competitor actions. Can be negative or positive
Industry Risk- this is the unanticipated effect on the project cash flows of industry-wide shifts in Technology, changes in laws or in the price of commodity.
Market Risk/ Macro Economic Factors- changes in interest rates, inflation rate, tax policies and the economy
International Risk-changes in exchange rates and political scenarios
COMPARISON OF METHODS FOR THE RECOGNITION OF DERIVATIVE FINANCIAL PRODUCTS WI...IAEME Publication
In the global competition environment,the companies’ areas of usage regarding derivative financial products becamewidespread and these instruments started to take an important place in theliability statements of the businesses. In terms of financial accounting, thecompanies need to reflect the usage of derivative financial products in theirfinancial statements, and in terms of administrative accounting, they searchfor methods that will facilitate the follow-ups for the performance assessmentand decision making procedures regarding the processes of large scalederivatives.
The companies making investments in thederivatives in hopes of risk management or speculation acquire mutual rightsand liabilities through the contracts they make. For the assessment andrecognition of these rights and liabilities, the standards numbered TMS 32, TMS39, TFRS 7 and TFRS 9 were published by the Public Oversight Authority ofTurkey. These standards coincide with the standards published by theInternational Accounting Standards Board (IASB).
In this study, attention is drawn to theassessment and recognition of the derivatives in line with the aforementionedstandards, and alternative solutions are discussed.
Country risk assessment, also known as country risk analysis, is the process of determining a nation's ability to transfer payments. It takes into account political, economic and social factors, and is used to help organisations make strategic decisions when conducting business in a country with excessive risk.
An enormous effort has gone into banking and financial regulatory reform following the recent financial crisis. This presentation is an attempt to:
Describe some key open questions about the relation among stability, growth, and regulatory reform.
Raise some concerns about overemphasis on some instruments and under emphasize on others in the ongoing reform process.
The managers most likely to succeed in today’s business environment, are those who understand how to use budgets as business tools, for departmental and personal success.
Managing Budgets is an informative and practical guide to the essential skills needed.
produce accurate and useful budgets.
Mitigating Currency Risk for Investing in MFIs in Developing CountriesAndrew Tulchin
Working paper exploring methods to overcome a serious risk factor impeding investment in international development. Written by Romi Bhatia, Columbia University SIPA.
Examining the Usability of Message Reading Features on Smartwatchesinventionjournals
This study examined smart watch message reading features by considering the following assessment points: simplicity, comprehensibility, perceived usefulness, and overall satisfaction. Three smart watches (Pebble Watch, Samsung Galaxy Gear2, and Sony Smartwatch2) were subjected to user tests, and indepth user interviews were conducted. The results showed that 83.3% of participants experienced difficulty in checking and reading messages. Screen size, text size, and accessing messages were the top three factors causing inconvenience. The participants believed that the most useful feature of the smart watch was message notification, and message reading was also considered useful. The message notification function could be further developed for smartwatch design.
Towards Indian Agricultural Information: A Need Based Information Flow Modelinventionjournals
Information is crucial for agriculture and rural development. ICT based services in agriculture is gaining importance day by day. Paper proposes to study the nature of agricultural information its uniqueness and problems of handling and organization. Agri informatics and use of different web portals for agriculture also discussed. Paper also highlighted the ICAR and IARIs contribution towards development of NARS (National Agricultural Research System) and models showing Information flow and strategic plan for organization of agricultural information. Some recommendations for proper organization and dissemination of agricultural information have been made to reach grass root level with desired agricultural information.
An Analysis on the Attitudes of Academic Staff towards Distance Educationinventionjournals
In this study, the attitudes of the academic staff working in NamıkKemal University (NKU) towards distance education were examined according to different variables. Within this scope, the distance education attitude scale developed by Ağır et al. was used. 283 out of 955 academic staff working in NKU participated in this research in 2015. The data obtained from the research were analyzed by using SPSS (Statistical Package for Social Sciences) for Windows 22.0 program. In the evaluation of the data; numbers, percentages, mean and standard deviation were used as the descriptive statistical methods. T-test was used in the comparison of the quantitative continuous data between two independent groups, while One-Way ANOVA was used in the comparison of the quantitative continuous data between more than two independent groups. In order to determine the differences after the ANOVA, Scheffe’s test was used as the complementary post-hoc analysis. The obtained findings were evaluated at the confidence interval of 95% and at the significance level of 5%. It was determined in the study that the attitude level of the participants as to “the positive aspects of distance education” proved to be moderate (2,851 ± 0,716); whereas the attitude level as to “the negative aspects of distance education” proved to be weak (2,430 ± 0,757); and the attitude level as to “the advantages of distance education” proved to be high (3,618 ± 0,713).While age and gender were seen to have not affected the attitudes towards distance education, the academic title was seen to have affected these attitudes. The obtained statistical data and findings contributed to the studies regarding the foundation and constitution of Distance Education Center (DEC) as well as raising awareness for DEC
Isolation and Characterization of Bacteriocin Producing Lactic Acid Bacteria ...inventionjournals
Bacteriocins are the extracellular proteins produced by the bacteria which inhibit the growth of similar or closely related bacterial strains. Lactic Acid Bacteria (LAB) are predominantly present in the fermented foods produce bacteriocins. In the present study, six strains (three strains each) were isolated from the fermented Bengal gram samples containing with husk and without husk.The organisms isolated were identified as Pediococcussp and Yeast sp.by the biochemical characterization. The bacteriocins produced by these organisms effectively inhibited the growth of E.coli, Klebsiellasp, Staphylococcus aureus, and Pseudomonas aerugenosabut couldn’t inhibit the growth of Proteus vulgaris and Bacillus sp. Strains c2 and c3 showed greater activity at low pH. All the strains showed antibacterial activity against Bacillus sp,E.coli, Klebsiellasp, Staphylococcus aureusand Pseudomonas aerugenosabut Proteus vulgaris showed high resistance when bacteriocin was exposed to temperatures 37°C and 80°C.
Tuition Reduction Determination Using Fuzzy Tsukamotoinventionjournals
The process of determining cuts tuition for students are usually given with the same nominal. And in this paper is the determination of the pieces tuition for students who are less able to be different, depending on how much income parents and the number of children covered. For income parents who get discounted tuition fee of IDR Rp.1,500,000 and for the number of children in these families also determine the number of pieces obtained. Tsukamoto Fuzzy system is the model used in this paper. Each input variable is divided into three membership functions. In this paper, Nine Tsukamoto Fuzzy model rules have been applied. The system also provides a consequent change of parameters if the current parameter values to be changed. The smaller the parent's income, the greater the pieces obtained. The more children insured the greater the college acquired pieces.
Importance International Financial Management Financeijtsrd
Quick globalization, the financial crisis and the ever-changing business environment make the current financial management more complicated than ever. Since the financial decisions taken by the International Finance Management (IFM) have taken place, the same forces make successful financial controls so important. The development of international trade is evident in the high inflation-sized mode of international trade. The history of international trade can be traced after World War II. Trade agreements have been made on trade and tariffs to increase trade immediately after the war. This establishment removes widespread trade restrictions over the years, and as a result, multinational trade has increased. In addition, the financial assistance of trader on exports and imports extends to countries extensively. Since then, this situation will continue to stimulate all kinds of and sizes companies to think about how to use resources when dealing with international markets. This expansion increases significant variation in the condition of market stability. As a result, major financial decisions today lead to border issues. All other factors in investment, risk management, investment decisions, mergers, rebuilding and economic strategy are usually international complexes and these issues increase the need for international financial management. When the financial organizers make these decisions, they should consider currency conversion rates, risky factors of the particular country, variation in tax rules, and devaluation in legal systems. In short, financial managers of multinational corporations and international financial management are most important and are discussed in detail below. Arelli Ankitha"Importance International Financial Management Finance" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-3 , April 2018, URL: http://www.ijtsrd.com/papers/ijtsrd12893.pdf http://www.ijtsrd.com/management/management-development/12893/importance-international-financial-management-finance/arelli-ankitha
Effect of Enterprise Risk Management on Sustainable Financial Performance of ...AJSERJournal
The paper is aimed at determining the effect of Enterprise Risk Management (ERM) on Sustainable
financial performance of deposit money banks in Nigeria. The specific objectives of the research is to determine the
effect of ERM on earning per share (EPS) and to ascertain the effect of ERM on Tobin Q. Descriptive research design
was adopted for the study considering the total population of all the twenty-one listed deposit money banks in Nigeria.
Data were gathered via secondary source from five (5) public annual reports of the listed deposit money banks for a
period of six years ranged from 2013-2018 and analysed using percentages and ratios. Multiple regressions was
employed in data analysis and testing the hypotheses; in determining if there is a significant effect of Enterprise Risk
Management on Earnings per Share and Tobin Q of listed deposit money banks in Nigeria. The study revealed that
there is a positive and significant relationship between ERM (Firms Size, Leverage) and sustainable financial
performance (TQ & EPS) of listed deposit money banks in Nigeria. Based on the findings, the study recommends that
financial institutions in Nigeria should employ robust Enterprise Risk Management Practices as these are likely to
greatly influence their financial performance in one way or the other and that Central Bank of Nigeria and other
regulators should endeavour to strengthen the enforcement of risk control mechanism to boost a robust bank
performance.
SME Manufacturing Credit Risk Model Forecast Correctness and Result of ModelIOSR Journals
Thai SMEs employ about 69 percent of the total population. However, SMEs structure of short term financial characteristics as they depend mostly on short term loan. Thus, we have to be aware of financial distress of SMEs. This study utilizes a Logit analysis model to examine financial ratio of 385 SMEs financial statements. The result showed that those of 37 financially distressed and 348 non-financially distressed enterprises. This study conducted with 2 research questions which are (1) Are there significant differences in liquidity, leverage and profitability ratios of financially distressed and non-financially distressed Thai SMEs. (2) Is Logit model is a good model for measuring liquidity, profitability, and financial leverage classifies Thai financially distressed. The study has examined empirical evidence from Thailand manufacturing industries to identify differences between financial profiles of financially distressed and non-financially distressed SMEs. It then developed and tested the Logit analysis model for predicting SMEs financially distress. The first hypothesis is supported, which showed that there are statistically significant differences between financial ratios of financially distressed and non-financially distressed SMEs in Thailand. The second hypothesis showed that the predictable of financial ratios in the Logit analysis model enables classifying Thai financially distressed and non-financially distressed SMEs more accurately than a possible occasional classification. Finally, this study could help policy-makers, SMEs owners and business consultants to determine strategies in order to develop Thai SMEs manufacturing Industry sustainably. Moreover, the Logit model of this study could be applied in other industries in order to expand the growth of Thailand industries.
Business and Risk go hand in hand, the professionals like chartered accountants with expertise in finance, management and audit are well suited for the role of forecasting, evaluating, and mitigating prospective risk involve in any organization’s activity and seize opportunities to take the growth of business on next level. This article brings you in-depth details of the role of a chartered accountant in Enterprise Risk Management.
Running Head ECONOMICS AND ADMINISTRATION1ECONOMICS AND ADMI.docxtodd271
Running Head: ECONOMICS AND ADMINISTRATION 1
ECONOMICS AND ADMINISTRATION 5
ECONOMICS AND ADMINISTRATION
Khalia Hart
Dr. Touhey
MGMT 640 – Financial Decision Making for Managers
March 31, 2019
EXECUTIVE SUMMARY
For the success of every business, there needs to be a strong supporting factor that enforces success. The success of a business indicates that the structure of decision making is tough, strict but at the same time lenient to staff and more importantly customers. Financial management is a very vital factor to consider while engaging in any business activity. Not only is it concerned about customers and staff, but also affects every aspect of the business from managing cash flow and maintaining performance index to developing plans to ensure maximum use of opportunities by business owners. Stakeholders and business owners need to realize the importance of financial management as a tool in business administration since it is the force that ensures continuous development of financial capabilities needed for a business to achieve its full potential.
The macro-economic environment addresses issues concerning behavior. Here are where aAdministrative issues lie. Administration can be categorized into two main categories, administration as a practice and as a science. Administration as a practice mainly addresses the normal routine of business owners and managers and their normal administrative roles in any business entity. Administration as a scientific field is bound to face challenges which are broken down into four main classes. They are discussed fully in this document.
Factors that affect administrative decisions include globalization, cost of control, the relationship between stakeholders and demand on ethical behavior and corporate responsibility. Administrations in different organizations should always be keen to ensure that the named issues are always put under the eye . These factors can greatly affect the performance of a business entity as shall be discussed in this document. Comment by debra touhey: Good start, Khalia. The Executive Summary should explain the problems at hand with potential solutions to those problems. Here is a good reference on writing Executive Summaries:
https://www.inc.com/guides/2010/09/how-to-write-an-executive-summary.html
INTRODUCTION
Since time immemorial, business has always been a very important factor in society. To date, business transactions take place daily through the various business entities that have been established. In the modern world, however, various guidelines, strategies, and tools have been established to ensure that business practices go on smoothly (Robert et al., 2004). Comment by debra touhey: A little too informal for graduate writing
One of the practices that have been developed to ensure maximum productivity in the various entities that have been established, is financial management. The financial management function allows for the planning, organizing, monitori.
Since the onset of the global financial crisis in 2008, businesses around the world have faced a barrage of new risk-related challenges.
The macroeconomic environment of recent years, marked by the global financial crisis, fiscal uncertainty in the US and sovereign debt problems in Europe, has also helped to make companies more riskaverse, leading them to swap bold investment decisions for more cautious behaviour and cash hoarding. The tide is turning, however, with most expecting 2014 to mark a return to growth...
Proposed topic of the res an emperical analysis on interest rate risk managem...tesfatsion tefera
Risk is defined as anything that can create hindrances in the way of achievement of certain objectives. It can be because of either internal factors or external factors, depending upon the type of risk that exists within a particular situation. Exposure to that risk can make a situation more critical. A better way to deal with such a situation; is to take certain proactive measures to identify any kind of risk that can result in undesirable outcomes. In simple terms, it can be said that managing a risk in advance is far better than waiting for its occurrence. Risk Management is a measure that is used for identifying, analyzing and then responding to a particular risk. It is a process that is continuous in nature and a helpful tool in decision making process. According to the Higher Education Funding Council for England (HEFCE), Risk Management is not just used for ensuring the reduction of the probability of bad happenings but it also covers the increase in likeliness of occurring good things. A model called “Prospect Theory” states that a person is more likely to take on the risk than to suffer a sure loss.
Similar to Fınancıal Rısk Management 'S Impact On Company Value (18)
Hybrid optimization of pumped hydro system and solar- Engr. Abdul-Azeez.pdffxintegritypublishin
Advancements in technology unveil a myriad of electrical and electronic breakthroughs geared towards efficiently harnessing limited resources to meet human energy demands. The optimization of hybrid solar PV panels and pumped hydro energy supply systems plays a pivotal role in utilizing natural resources effectively. This initiative not only benefits humanity but also fosters environmental sustainability. The study investigated the design optimization of these hybrid systems, focusing on understanding solar radiation patterns, identifying geographical influences on solar radiation, formulating a mathematical model for system optimization, and determining the optimal configuration of PV panels and pumped hydro storage. Through a comparative analysis approach and eight weeks of data collection, the study addressed key research questions related to solar radiation patterns and optimal system design. The findings highlighted regions with heightened solar radiation levels, showcasing substantial potential for power generation and emphasizing the system's efficiency. Optimizing system design significantly boosted power generation, promoted renewable energy utilization, and enhanced energy storage capacity. The study underscored the benefits of optimizing hybrid solar PV panels and pumped hydro energy supply systems for sustainable energy usage. Optimizing the design of solar PV panels and pumped hydro energy supply systems as examined across diverse climatic conditions in a developing country, not only enhances power generation but also improves the integration of renewable energy sources and boosts energy storage capacities, particularly beneficial for less economically prosperous regions. Additionally, the study provides valuable insights for advancing energy research in economically viable areas. Recommendations included conducting site-specific assessments, utilizing advanced modeling tools, implementing regular maintenance protocols, and enhancing communication among system components.
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Indigenized remote control interface card suitable for MAFI system CCR equipment. Compatible for IDM8000 CCR. Backplane mounted serial and TCP/Ethernet communication module for CCR remote access. IDM 8000 CCR remote control on serial and TCP protocol.
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Technical Specifications
Indigenized remote control interface card suitable for MAFI system CCR equipment. Compatible for IDM8000 CCR. Backplane mounted serial and TCP/Ethernet communication module for CCR remote access. IDM 8000 CCR remote control on serial and TCP protocol.
Key Features
Indigenized remote control interface card suitable for MAFI system CCR equipment. Compatible for IDM8000 CCR. Backplane mounted serial and TCP/Ethernet communication module for CCR remote access. IDM 8000 CCR remote control on serial and TCP protocol.
• Remote control: Parallel or serial interface
• Compatible with MAFI CCR system
• Copatiable with IDM8000 CCR
• Compatible with Backplane mount serial communication.
• Compatible with commercial and Defence aviation CCR system.
• Remote control system for accessing CCR and allied system over serial or TCP.
• Indigenized local Support/presence in India.
Application
• Remote control: Parallel or serial interface.
• Compatible with MAFI CCR system.
• Compatible with IDM8000 CCR.
• Compatible with Backplane mount serial communication.
• Compatible with commercial and Defence aviation CCR system.
• Remote control system for accessing CCR and allied system over serial or TCP.
• Indigenized local Support/presence in India.
• Easy in configuration using DIP switches.
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CFD analysis is incredibly effective at solving mysteries and improving the performance of complex systems!
Here's a great example: At a large natural gas-fired power plant, where they use waste heat to generate steam and energy, they were puzzled that their boiler wasn't producing as much steam as expected.
R&R and Tetra Engineering Group Inc. were asked to solve the issue with reduced steam production.
An inspection had shown that a significant amount of hot flue gas was bypassing the boiler tubes, where the heat was supposed to be transferred.
R&R Consult conducted a CFD analysis, which revealed that 6.3% of the flue gas was bypassing the boiler tubes without transferring heat. The analysis also showed that the flue gas was instead being directed along the sides of the boiler and between the modules that were supposed to capture the heat. This was the cause of the reduced performance.
Based on our results, Tetra Engineering installed covering plates to reduce the bypass flow. This improved the boiler's performance and increased electricity production.
It is always satisfying when we can help solve complex challenges like this. Do your systems also need a check-up or optimization? Give us a call!
Work done in cooperation with James Malloy and David Moelling from Tetra Engineering.
More examples of our work https://www.r-r-consult.dk/en/cases-en/
Water scarcity is the lack of fresh water resources to meet the standard water demand. There are two type of water scarcity. One is physical. The other is economic water scarcity.
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Fınancıal Rısk Management 'S Impact On Company Value
1. International Journal of Humanities and Social Science Invention
ISSN (Online): 2319 – 7722, ISSN (Print): 2319 – 7714
www.ijhssi.org ||Volume 5 Issue 3 ||March. 2016 || PP.48-53
www.ijhssi.org 48 | P a g e
Fınancıal Rısk Management 'S Impact On Company Value
Murat Turgut
Nişantaşı University, Faculty of Economics, Accounting and Financial Management Faculty of Administrative
and Social Sciences, Asst. Assoc. Dr. Murat Turgut, Istanbul / Turkey,
ABSTRACT : The competition taking place under the current conditions reveals future uncertainty. To protect
against possible adversities and create defenses at this point, no longer it has a compelling Taking requests
from businesses. Financial risk management, reduction of the negative effects of the financial risks to the
company, so the profitability of the company and the company is found to be useful to the extent it is important
towards enhancing competitiveness. Financial risk management activities are also a cost themselves. The
benefits will be provided for the management of financial risk, financial risk activities of the company are
meaningless if they remain lower than the resources will be spent on risk management. However, the issue is
quite complex, sectoral and disadvantages of return of financial risk management, and risk types can vary
cyclical basis.
international financial markets since the 1970s witnessed an important transition period. The globalization of
international financial markets, free movement of capital, technological advances and increased competition a
new process, launched the company with financial instability and has faced financial risk concept. Therefore
institutions in ensuring the continuity of existence and reaching their goals were to identify financial risks,
measure and manage today's extremely critical.
I. EXTENDED
Competitive conditions experienced in today's conditions reveal future uncertainty. To protect against possible
adversities and create defenses at this point, no longer it has a compelling Taking requests from businesses.
Financial risk management, reduction of the negative effects of the financial risks to the company, so the
profitability of the company and the company is found to be useful to the extent it is important towards
enhancing competitiveness. Financial risk management activities are also a cost themselves. The benefits will be
provided for the management of financial risk, financial risk activities of the company are meaningless if they
remain lower than the resources will be spent on risk management. However, the issue is quite complex, sectoral
and disadvantages of return of financial risk management, and risk types can vary cyclical basis.
international financial markets since the 1970s witnessed an important transition period. The globalization of
international financial markets, free movement of capital, technological advances and increased competition a
new process, launched the company with financial instability and has faced financial risk concept. Therefore
institutions in ensuring the continuity of existence and reaching their goals were to identify financial risks,
measure and manage today's extremely critical.
Bretton Woods system of fixed exchange rates used for the years 1940-1970 in exchange less be felt until the
financial risks of fluctuations in interest rates and thus many phases to be ignored financial risk management
techniques are recognized. In the 1970s, as a result of developments occurring in the global economy stable
period has expired earlier, many western countries have demonstrated sensitivity to rapid financial risk
management. in exchange rates due to the abandonment of the fixed exchange rate system and it emerged
fluctuations in interest rates and operating in international foreign currency from enterprises need debt as well as
payments arising from the national currency against the value changes were faced with financial losses. In this
case, despite the financial circles losses arising from exchange rate and interest rate fluctuations and minimizes
have developed a number of instruments in order to profit from this situation (Erdoğan, 1995: 113).
The first time occurred in the risk management methods are used to unexpected changes in interest rates that
have occurred and the closure of the damage caused by the fall. Risk management is showing improvements in
subsequent periods should be established as well as accompanying changes in financial prices brought risks as
well, including a format has both pursuing both profit being used by institutions not-for-profit (Sayılgan, 1995:
325-326).
GİRİŞ
Bretton Woods system of fixed exchange rates used for the years 1940-1970 in exchange less be felt until the
financial risks of fluctuations in interest rates and thus many phases to be ignored financial risk management
techniques are recognized. In the 1970s, as a result of developments occurring in the global economy stable
period has expired earlier, many western countries have demonstrated sensitivity to rapid financial risk
management. in exchange rates due to the abandonment of the fixed exchange rate system and it emerged
2. Fınancıal Rısk Management 'S Impact On Company...
www.ijhssi.org 49 | P a g e
fluctuations in interest rates and operating in international foreign currency from enterprises need debt as well as
payments arising from the national currency against the value changes were faced with financial losses. In this
case, despite the financial circles losses arising from exchange rate and interest rate fluctuations and minimizes
have developed a number of instruments in order to profit from this situation (Erdoğan, 1995: 113).
The first time occurred in the risk management methods are used to unexpected changes in interest rates that
have occurred and the closure of the damage caused by the fall. Risk management is showing improvements in
subsequent periods should be established as well as accompanying changes in financial prices brought risks as
well, including a format has both pursuing both profit being used by institutions not-for-profit (Sayılgan, 1995:
325-326).
Objective: This study was conducted to examine the financial risk management of the impact on firm value.
Scope: The scope of the study is limited to Turkey.
Methods: This study is to analyze the information obtained by an examination of the literature was performed.
Problem Research: Financial risk management is to determine the effect on firm value.
1.CONCEPT AND RISK MANAGEMENT
1.1. Financial Risk Concept
Financial risk, "they fail to fulfill their financial responsibilities of the business or the possibility of losing their
invested funds of investors as a result of the bankruptcy" is defined as (Karas, 1991: 24). the common
description of the financial risk, "the possibility of loss that may arise due to the company's financial structure"
form (Paterson and Wendel, 1996: 15-22). Eales (1995: 1), financial risk, with one based approach to
riskyönetim businesses suffer substantial financial losses due to encounter a dangerous situation and is referred
to as the management of money by controlling this situation.
Financial risks, which are industrialized countries after 1990, especially, emerges as a reflection of the financial
crisis has had an effect on the financial structure of the company. This process gave priority to work on the
company's financial risk management in order to achieve or to gain protected from financial risks. It
experienced a major transition in the international financial markets and 1990s. Variable and increased
uncertainty in the financial markets and the emergence of complex procedures with greater risk than before the
financial market participants in the financial sector came face to face. Financial risk will reduce the profits of the
company or extreme cases are being confronted with adverse events when it comes to businesses into
bankruptcy. Chapman most important sources of risk have been grouped under three main headings.
Accordingly, the return on assets of the business uncertainty or borrowed loan because interest rates (interest
rate risk) of the loan received from a third party interest and principal of the failure to pay (liquidity risk) or
failed to comply with fixed payments on company assets (funding risk) is a financial risk. Due to some
uncertainties, investors take wrong decisions. Investors can not calculate accurately the cash flows and business
to the detriment, or even emerging as to endanger the development of business investment risk is the risk of
another financial source. credit risk due to the uncertainty of the amount and the time of the offer will occur
during the third and last in the business to sell their products and services (Chapman, 2006: 203-204).
1.2. Financial Risk Management
Financial risk management concepts and much more for many years, primarily to be addressed in terms of banks
and other financial institutions, non-financial companies has brought the concept of risk management in case of
secondary importance. Bank related to the management of banking risks of International developed by
Settlements, Basel II criteria, financing, together with the non-performing emphasis on companies' risk
management and risk management implements firms to bring in regulations that will affect the cost of capital,
non-financial that it represents a value to the extent of financial risk management for companies and firms as to
what extent the value contributed more questions are being asked.
1.2.1. Why are referring to the company Risk Management
Nocco and Stulz (2006), on the basis of the company as at the micro level could be argued that in some
departments of risk management to create value at the macro level. In the same study, the company of some of
the risk management, corporate managers to macro-level risk-return balance (the amount of return to be
sacrificed to download a certain level targeted risk) to be calculated and managed is stated that create economic
value by providing perspective. In addition, the company will have access to the capital market easier to have
perspective in this way is emphasized.
Paul Sarmas the (2004-2005) by the company There are five main factors that lead to financial risk
management. According to this,
Administrative impulses: to be equipped with the company's stock that they manage their business managers to
avoid taking risks causes more and their risk of being pro-active. But the manager's stock holders rather than
risk having to stock options that avoid the situation accordingly also seen a reduction in the risk management
activities.
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Corporate taxes: income due to reduced variability in risk management is to reduce the business tax burden.
Bankruptcy costs: borrowed at high risk of bankruptcy and the company is also increasing the income variable.
This increases the cost of the bankruptcy.
Capital market shortcomings: the variability seen in the company's internal resources outsourcing are forcing
them to find out more. This situation increases the investment cost, resource input in the capital markets weak,
demand for capital leads to higher investment in the context of the finances and outsourcing raises the total cost
of capital. internal resources and risk management to reduce the need for outsourcing will become the stable, it
will increase the rate of profit due to reduced capital costs.
Representation costs: conflict of interest between the places borrowed by the company's shareholders can turn
into cost represented indirectly. In other words, those who go to great debt ratio of cash flow to be generated
from existing shareholders using their impact on the project if the project managers are rejected. Keep in mind
that the debt of these cases represent risks arising from lending and increase the costs.
Géczy Minton and Schrand A (1997), The pressures of business risk management are as follows:
Who directs the corporate risk management: managers who prefer the company shares the risks associated with
the disposal of the shares. The high cost of the company's bankruptcy and bondholders who do not want to
experience financial problems, the company will become more stable income with the cash flow management of
risks will increase the company's profit think so. The shareholders of the company who can store information
due to asymmetric information manager may wish to pursue the company's risk management effectively.
Variability and magnitude of risk: is directly proportional to the amount of benefits to be achieved the risks
associated with the company's risk management. two components that is the issue that determines the risk
inherent in the company at this point: the size of the amount of risky positions and moved to the risks of price
volatility.
Risk management costs: the costs of risk management, risk management is higher than the benefits they provide
to the company will avoid taking risks management positions. separate units and staff for risk management
Apart from this, they avoid the embodiments which require fixed costs such as creation. Where the other hand,
low cost companies are avoiding risk management are systematic risk management in its operations.
1.2.2. Basel II Criteria and Its Relation to Non-Financial Company
The main source of financing is quite limited due to the issuance of securities of the private sector in Turkey are
commercial banks. Which aims to control credit risk of banks, especially the Basel II risk management criteria,
it gives responsibility for banks to create and develop risk management systems for this purpose. These
responsibilities within the Bank, the necessity to have the ability to measure the main factors that make the risk
is introduced. It must be able to measure in terms of the scope of the banks' credit risk more accurately, Basel II
credit risk of banks are encouraged to differentiate their criteria. Banking supervisors in the process leading to
the internal rating system; Not only substandard or problematic loans also allows the provision of the
classification of prudent lending, with loans and credit terms, terms and different risk characteristics to have a
differentiation in terms of loan types (such as wholesale and retail loans) to be allowed, it would be more useful
than the loan classification system advocated . The study's version of 2006, which further elaboration is made
more concrete differentiation in question and corporate loans will come from customers of rating agencies or
bank requires classification according to the degree of risk to be found using their own internal risk rating
mechanisms.
In this case, the establishment of an enterprise risk management system for the company to manage specific or
overall risk is taken into consideration, the correct calculation of the risks and to manage the company
profitability and to investigate the effect of the consequent value of the firm is important. A key issue to be
considered here is to determine whether the right higher than the potential cost of the risk management and risk
management costs.
1.2.3. Risk Management in the Turkish Trade Law
Article 378 of the new Turkish Commercial Code numbered 6102, the share of risk in securities of companies
traded in the stock market can be identified early and taken to manage the necessary measures are emphasized.
In the Law, a committee of experts set up to manage the financial risk of the company, to run the risk
management system and is said to be responsible for developing. In the non-public companies in the same law it
deemed necessary by the related auditors and the board risk management committee and if the report is called
writing system is created. (T. T. 6102 Act)
II. BUSINESS FINANCIAL RISK MANAGEMENT AND FINANCIAL RISK MEASUREMENT
METHODS USED
2.1. Financial Risk Management
Business risk management is the first step in the removal of some of the company's risk profile. The emergence
of a clear risk profile for the creation of the firm's risk managers and risk management strategies will make an
important contribution to the implementation. relating to the firm's risk profile may differ in terms of business.
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Keulen (2009) following the procedure recommended by creating risk profile gives you a general idea about
this:
• List of potential risks faced by the company is created. This list only company in the industry and
makrekonomik risks affecting the economic environment in which the company operates alongside the interest
risk should be found.
• The company's exposure to risks, market risks, financial risks, operational risks, the risks will directly affect
the value of the firm and the firm should be classified as risks that affect a smaller scale. If those profiles to
work with just about non-financial risks such as operational risks, financial risks do not take place within this
classification.
• Reclassification of the magnitude of the risk that the company carries on each type of risk should be identified.
If a requested specific studies should determine how it will affect company revenues of risks in each category.
• The company must decide whether it is necessary to manage the identified risks. In the process of making this
decision and risk management benefits of a cost analysis should be done. This is because of the resources spent
on risk management is always possible due to the lack of delivering value to the company.
• The company's focus on risk management in areas where the advantage over their competitors allows the
appreciation by increasing the competitiveness of the company. Risk management strategies should be
considered in the preparation of this issue.
2.2. Methods Used in Measuring Financial Risk
2.2.1. Classical Methods
development and practical innovation in the field of statistics and financial theory leads to the computation of
the risk of more value over time. For many years, the main method of calculating the probability of risk,
decision tree analysis is used and is often used method is taken of the potential damage and the expected value is
used by insurance companies.
Net present value (NPV) and internal rate of return (IRR) techniques such as time, especially in projects
currently being used in the calculation of risk financing techniques have emerged as.
Capital asset pricing model (CAPM) method is set up is as a method of determining the rate of return required
for assets that can not be reduced by diversification of risk with the risk of a particular asset of the company that
the link between the return provided by the entity.
Basically shows the relationship between risk and expected return CAPM and is formulated as follows:
ra = RF + β (rm - rf)
ra, the assets owned (or project) costs; RF, risk-free interest rate; β existence or extent of a project by the RM is
the return on the market. Located in the above formulation rf asset or systematic risk of the project showed that
β (rm - rf) The elements identified as unsystematic risk. Here, the β spesifikvarlık or project in question showed
the risk of variability of weight (rm - rf) value shows the average risk premium is the like of the asset or project.
2.2.2. Economic Value Added (Eva) / Market Value Added (MVA)
These two performance measures of the company's management is focused on increasing the company's value
does not increase. Market Value Added (MVA), the company's shares with a current market value of the
company and the investor is aware of the current period until the capital provided by the organization. Economic
Value Added (EVA) is periodically measures the next income after deducting all the costs, including the cost of
capital. MVA company reflects the sum of all eva throughout history. Although controversial aspects together to
create real economic value of the companies do not generate inspection is important.
2.2.3. Qualitative (Qualitative) Analysis of Risk
of the quantitative magnitude of the risks of the Company may be limited by computational studies estimate the
size completely in some areas. For example, often fall into financial difficulties due to the financial risks in a
company that has harmed the company's business reputation. Such a methodology is generally accepted to
develop a commercial reputation to calculate the quantitative magnitude of the risk is almost impossible.
Such risks are the most widely used method to make measurable quantitative scenario analysis means. Scenario
analysis is aimed at finding the maximum possible damage on different scenarios. These scenarios are weighted
according to the probability of realization and ultimately expected () a risk miktarıbulun. In this method,
decision tree analysis mainly (decisiontreeanalysis) method is used.
Another method for quantitative measurement of this type of risk is the brainstorm. This method carries the risk
directly related to the company's experts and decision-makers to come together and discuss the risk values they
have agreed is acceptable.
Classification and regression trees (classificationandregressiontrees - CART) method (Thrasher, 1991) is both
the analysis and the classification tree method that includes a combined regression analysis. This method is
based on considerations such as the volatility of regression analysis revealed that that the income and
expenditure position and cash flows in scenarios to be performed for the possibility of each scenario forming the
decision tree is removed from if the scenario in question the decision tree within tolerable limits the risk of the
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company. Ultimately the results of the analysis carried out on the remaining scenarios are identified risks behind
the company's move because the asset or project.
Risks and Operability (hazardandoperability - HAZOP) method (Rusli and Mohd, 2010) aims to detect possible
losses if asked about systematically organized flow of action and appears to be given by each risk is a method
consisting of questions-profit organizations. For example, a company wishing to operate in a new sector asks
whether deviations in production to be made in this new activity, if questioned what will be the damage to the
company of these deviations Any deviations, what are questioning can be done to reduce the damage in question
and questions about what can be done company costs finally asked. As a result of this new project feasibility is
found positive investment decision. So in a nutshell, the firm will undertake the risk of asking questions for each
stage of the investment and how to find the way that works to rule.
Programs and Evaluation Review Technique (Program and Evaluation Review Technique - PERT) method
(Bergantinos vevidalpug in 2009) is the investment or the end of the beginning of the project will be realized in
the most effective way of risk and return combination to find a prospective method. This method using a
preselected path may be a better alternative investments it has also said.
III. METHODS FOR DETERMINING THE COMPANY VALUE
The basic approach in the development of financial valuations, discounted cash flow models. CAPM and APM
models have provided the link between the company returns and market risk. Investment decisions contribute to
firm value. Investment decisions which take into account the investment models desired capital stock interest
rates, production, costs associated with the capital assets and tax policies. Tobin's q as models linking models
are made with an investment of the company's value. WACC (weighted average cost of capital) worth of shares
in the composition of the financing concept is used to explain how he affects. These are economic models that
are based on performance criteria outside. The company's ability to generate economic rents these models are
considered. Economic rent-producing firm "no longer market value" (in excess of market value) is expected to
achieve. Now is the level of risk in the market value of similar companies t is a definition for surplus values
acquired by other companies that do not generate economic rents.
IV. DISCUSSION
General sense of an asset and the valuation of a company depending on these assets, cash flows and free cash
flows of the investment provided for the activities of the company are used. If you share the appreciation of the
free cash flows provided from financing in addition to these elements is used. Calculation process in the
discount rate of Sharpe (1964), Lintner (1965) and Black (1972) with retrospective data such as the shape of the
CAPM and the errors that may occur in the value calculated approximately, in a significant amount of the
calculated value of the firm can lead to deviations. CAPM anomalies that arise during the various tests regarding
perceived as a risk factor that can be used in stand-alone valuation of the CAPM model raised question marks.
Beta outside firm size as factors that affect the returns of the companies, book value / market value ratio of
financial leverage ratio price / earnings ratio, dividend yield and share price can be considered. Indeed, only to
assert power can be explained by the effects of beta coefficient value to the company of these elements in the
effective functioning market.
Valuation procedures for Another issue is inefficient use of capital, cost of capital, cost of essential discount
rates, which had been used on the companies' past projects and is not based on the current cost of capital for
different maturities. This situation is open to manipulation by the company and will form the basis of future
interest rates are assumed to remain constant cost of capital. Keene most healthy discount rate in such
circumstances, taking into account the returns on bonds of other companies traded on the bond market suggests
that such firms can be found. Whereas the private sector in Turkey in terms of functional bond market in
countries which do not or will not issue bonds or bills as small companies like this seems far from being true.
joint management company which is one of the basic elements - effects on firm value of relationship managers
is one of the most important issues in corporate finance literature. Company executives taking their earnings to
the fore that can impact negatively on the profitability of the company, it can be defined as the costs of
representation and the classical valuation model is suggested to define whether these costs. Gain company
linked to the performance of the managers prefer such an unnecessary risk-taking or extreme risk aversion can
be a disadvantage in making optimal decisions of firms. However, representation costs may also vary according
to the firm's riskiness. Leaders in terms of earnings-performance decreases with increasing awareness of the
firm's riskiness. (Vesamwick Aggarwal, 1999). Here riskiness of the company as determined at a lower rate
depending on the performance of the manager with the increase in earnings may reach the conclusion that it also
increases the cost of possible representation.
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RESULT
financial risks in the daily activities of the company with the globalization process will be mentioned in each
period. Financial risks as long as it had to reduce the impact of these risks and financial risk management in
order to convert earnings for the company to maintain its always up to date, will form an important part of the
işt98let studies management processes by developing new techniques and applications.
financial contribution to the company's financial risk management can always reflected in the value of the firm.
changes in the value of the company of so many different elements that affect the company's risk management
when it comes to value to determine to what extent the effects can include difficulty. When this perspective on
the impact of financial risk management firm value of this thesis in any way "in terms of financial risk
management firm sturdy useful and necessary" has caused the necessity of asking questions.
Bulunamas even the benefit of a direct link between risk management and financial risk management firm value
and necessity of the reasons stated above, it is clear. This can be seen clearly in the regulations regarding their
financial risk management of domestic and foreign regulatory authorities.
On the other hand all of the potential risks of globalized markets, the company is exposed to increased
competition with exchange rate and interest rate possible to connect to the live variables. time method of
protection from the risks arising at this point and will be implemented in the most efficient manner not to cause
negative on business value. On the other hand, although the reduction of possible damage by removing the risk
management methods of the threats faced by the company is also a financial burden to business aspects. But the
company lowered the risk management methods with minimal damage incurred is a fact.
ensuring better management of the business genişlettirilerek attitude towards risk managers in this context, as
well as providing protection against the risks of the business will provide the maximum benefit to him.
Determination of preliminary vision for the future of risk identification and possible loss of business will
recover.
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