Risk Management &

Businessss Strategies in the

Telecommunications Industrytry

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Table of Contents
Risk Management and valuelue
Risk Management and costst

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 Types of Risk
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 Summary of types of Risk and
RiskRisk Management

Market risk Liquidity risk Regulatory

Operational
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Telecommunications industry risk identification and its management

 Types of Risk
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 Risk identification and Risk Comparisons
- Transaction, Economic & Operating Risk
Date of change in the exchange rate

Accounting risk Operating risk exposure

exposure
Changes in expected future cash flows due to
Changes in equity in Consolidated unexpected changes in the exchange rate
Financial Statements due to changes
in the exchange rate

Transaction risk exposure

Impact of settling outstanding obligations entered into before change in
the exchange rate but settled after change in exchange rates
Time
 Risk identification and risk
tolerance

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A Risk map or risk ID
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A Risk map or risk ID (1))

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Refinement of identifiable riskss (2)(2)

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Managing financial risk: typess
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 Managing financial risk:
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Hypothetical example of managing financial risk4 4

Cost in US dollars of Call option strike Uncovered costs

Telcos’ £1,000,000 A/P price of $1.75/£ whatever the ending
1.84 Forward rate spot rate is in 90 days

1.82 is $1.7540/£
Money market hedge
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1.78 Locks in a cost of $1,781,294

1.76
Call option hedge Forward contract hedge
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locks in a cost of $1,754,000
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1.70

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1.68 1.70 1.72 1.74 1.76 1.78 1.80 1.82 1.84 1.86

Ending spot exchange rate (US$/£) 9696

Types of hedging, strategy
choiceoice and outcome
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Risk management in practicetice

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Business risk
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Financial risk and its
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