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CORPORATE RISK MANAGEMENT - Essay Example
Pages 4 (1004 words)
Risk Management The management of risk is done by analyzing the costs and the benefits that the company shall be able to receive in return (Holmes, 2002). The management of risk is done on short term and on the long term basis as the cost benefit analysis of both the options are different when the time value of money is considered and in certain cases the risk association with the short term might not be the same as in the long term…
Companies incur a substantial amount of cost in the management of the risks (Ridley & Channing, 1999). Companies hire experts in order to mitigate the risks associated with its operations. The amount of risk to be mitigated varies from company to company and operation to operation. The dependency is related with the intensity of the risk as the risk shall be high when it affects the company’s operation at maximum (Agrawal, 2009). Although the risk is attached with every operation of the company but there are some certain areas in which the concern of the risk is substantial and companies’ need to focus more upon those. The costs associated with risk management is dependent upon both, the intensity of the risk and the value of that risk. The intensity and value tend to differ in every operation and every company. Some companies are more concerned about stock out than other whereas some companies are more concern about the halt in the company’s operations. The management of risk is carried out with utmost focus and importance when an investment is to be made. A decision to choose from many investments is to be made and usually the investment associated with least risk is preferred over others. ...
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