Chapter1Categorizing Financial Risks
THE ENTERPRISE RISK MANAGEMENT FRAMEWORK
Financial risk management is developed within a framework of enterprise risk management. In this section, we discuss that framework.
Enterprise Risk
This is defined as the variability of risks and opportunities when firms conduct business operations. It is a double-edged sword, as it focuses on both an upside and a downside. The focus is:
• Missed opportunities. The failure to undertake a business venture when it provides economic value possibilities at an acceptable level of risk
• Financial losses. The exposures that arise from business operations that can cause losses to current economic value
Financial risk is a subset of enterprise risk that encompasses the financial ...
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