Systematic and Unsystematic Risks - Essay Example

Only on StudentShare

Extract of sample
Systematic and Unsystematic Risks

This makes multi-national corporations safer compared to their domestic counterparts. Normally, systematic risk assessment are important for listed companies to effectively price the equities, determining the cost of capital and effective evaluation of projects. However, internationalization also poses some distinct systematic risks to multi-national corporations. Some of these distinct risks are - exposure to currency fluctuations in multiple countries, exposure to political risks pertaining to multiple governments, exposure to reduction in ability of monitoring managers in multiple countries, increased chances of asymmetric & inaccurate localized information thus resulting in wrong investment decisions, etc. Internationalizing investment portfolios also increases the exposure to unsystematic risks - like competitor activity in a foreign country, manager's foul play in another country where the company's monitoring system is weak, etc. Hence, it is important for the organization to have sound global knowledge base & threat database for risk management.
Organization structures with distributed power often increases the exposure to both systematic and non-systematic risks. This is the reason that Chatterjee and Lubatkin et al (1992. ...Show more

Summary

In this short essay, the author presents the brief on identification, measurement and investments in mitigation of systematic & unsystematic risks. The author has presented this subject in the context of Deloitte. In the end, the author has presented some discussion points.
Author : hchamplin
Save Your Time for More Important Things
Let us write or edit the essay on your topic
"Systematic and Unsystematic Risks"
with a personal 20% discount.
Grab the best paper

Related Essays

Corporate Finance Problems
The CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. If this expected return does not meet or beat the required return, then the investment should not be undertaken. Suppose a Three- Factor model is appropriate to describe the returns of a stock.
2 pages (500 words) Essay
Systematic Security Management
Rights on changing the information are provided only to the user having authentic means to reach the information and proper authorized identity which is disclosed to the information cluster by the user and information is updated by user. Integrity also pertains to the information being the same to all the assessors at any particular point of time i.e.
6 pages (1500 words) Essay
Beta
Money swings in the market, when financial crises arises in company, how financial needs are managed viz., in stock market most probably finance inflation may rise or fall and at the same time company's share market also fluctuates that may effect bank interest rate.
2 pages (500 words) Essay
Efficient Market Hypothesis
Thus if any investor desires to earn higher returns he has to buy much riskier shares or bonds. Ordinary shares carry then least amount of risk and therefore the least amount of return. However investors are using technical analysis and fundamental analysis when they are taking their investment decisions to gain trade returns.
8 pages (2000 words) Case Study
Integrated risk management (financial risk management)
A very good example is of Honeywell Inc. Honeywell has used an overall annual aggregate retention to manage its risks rather than using separate retentions for each risk. This does not only reduce premiums paid to
7 pages (1750 words) Essay
Understanding the Concepts
Discounted cash flows minus the investment cost are equivalent to the NPV. It is worth noting that when NPV is equal to zero the project has enough cash to pay its debts and equity, which was invested in the project. On the other hand, if the NPV is positive, it
4 pages (1000 words) Essay
Find out how much would it cost
to get a custom paper written by a pro under your requirements!
Win a special DISCOUNT!
Put in your e-mail and click the button with your lucky finger
Your email
YOUR PRIZE:
Apply my DISCOUNT