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Finance & Accounting
Pages 8 (2008 words)
<Title> <Student Name> <Name and Section # of course> <Instructor Name> <Date> 1. The Role of Risk: a) Risk and its importance in the investment appraisal process Risk, in pretty basic terms relates to someone or something that can create a potential hazard in the future.
Essentially a company is indulging into risk management if it is actively analyzing and attempting to quantify the possible losses in a business decision or an investment and then is taking appropriate action to mitigate the possibility of those losses occurring. It is fairly important to manage risk in an investment appraisal process as it helps the organization in protecting itself from all kinds of risks; it helps the organization’s customers from large non-market related losses such as a firm failure or fraud. A strong risk management process does not only help the organization, but it also provides security to the overall industry. Importance of risk management can also be gauged by some recent crisis that has happened due to loopholes present in risk management strategies of a few companies. The financial meltdown of 2008 is a key example. b) Measuring risk and incorporating risk in an investment opportunity Risk management is now an essential part in all the businesses as more and more businessmen are facing the repercussions of a poorly managed business decision in terms of risk. With the financial crisis slowly recovering, it is harder for people to now ignore the importance of risk. Predominantly, risk is considered to be a negative term. ...
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