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Systematic & Unsystematic Risk of Business

Systematic & Unsystematic Risk of Business

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Published by: puneet.chauhan3216 on Feb 15, 2011
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07/13/2013

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Systematic and Unsystematic Risk of a Business
By
Subject:
Financial Management
Indian Institute of Planning & Management
New Delhi
1
 
Abstract
The Vast majority of traditional research in finance appears to be biased towards thefinancial control and management of established businesses. The reference to newventure creation and start-ups are conspicuously absent from the literature. This ismore obvious in its treatment of risk in traditional finance literature. Theidentification, measurement and management of risk are based on the so-callednotion of ‘systematic risk’ (or market risk) only, measured by the ‘Beta’ of investmentreturns. The accepted wisdom in finance is that market volatility is the main concernin making investment decisions. Company and industry specific risk is trivial becausesuch risk could be eliminated through sufficient diversification of investment portfolio across the market. This paper argues that this paradigm of the portfoliotheory is, by and large, inappropriate for research in entrepreneurial finance, wherelife is complex, more unpredictable and perhaps chaotic. In the world of start-ups andnew venture creation, a business may not already exist, the entities may not be a player in the so called capital market, and the venture capital suppliers may not havethe luxury of relying on quoted market prices to guide them. Consequently, the firmspecific (and therefore neglected) ‘unsystematic’ risk becomes more critical.Unfortunately the body of research in this area is not huge. The discipline reliesheavily on intuition, gut feeling, anecdotal evidences, and admittedly, luck. This paper highlights the deficiencies of the traditional finance theories in dealing withrisk in a venture Capital (VC) investment decisions. It attempts to explore the venturecapital investors’ risk assessment and management techniques vis-à-vis the investors’ perception of risk. The objective is to identify key risk parameters and establish somecause and effect relationships between those variables. The paper suggests thatinstead of an all purpose model, a number of risk assessment tools are needed for assessing investment proposals at various stages in the life cycle of a business.2
 
Project Approval
From: iipm reexamination <iipmreexamination@gmail.com>Date: Tue, Jan 6, 2009 at 10:38 AMSubject: projects topicTo: puneet.chauhan@gmail.comDear puneet I am giving you the project which approved by sumanto sir. Also I am sending you theguideline of the project. So before doing the project please read it very carefully and thendo the project according to the guideline. Production:-Study production planning and control procedures in a manufacturing company andidentify the strength and weaknesses with the suggestion to improve. modern economic thoughts:- price cutting strategy and its effect on industry cesd:-Impact of subprime crisis on Asian Economies company law:-Corporate governance, practice and breakdown. Choose any company of your choice andsubstantiate the above statement.micro economic:-Price ceiling & Price floors, Price rigidity under oligopoly, Extent of market, Changingmarket conditions. financial mgmt:-Systematic and unsystmatic risk of a business Best regardsS.K. Maidul IslamIIPM, SatbariChandan haulaBhatimines road New Delhi-743

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