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CORPORATE RISK MANAGEMENT: A PRIMER
Nonfinancial companies are exposed to many traditional business risks: earnings fluctuate due to changes in the business environment, new competitors, new production technologies, and weaknesses in supply chains. Firms react in various ways: holding inventories of raw materials (in case of unexpected interruption in supply or an increase in raw material prices), storing finished products (to accommodate unexpected increases in demand), signing long-term supply contracts at a fixed price, or even conducting horizontal and vertical mergers with competitors, distributors, and suppliers.1 This is classic business decision making but it is also, often, a form of risk management. In this chapter, we’ll look at ...
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