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  • L-1-Risk Managemnt

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    The document discusses financial risk management. It defines risk as the degree of possibility or probability of loss. It notes that higher unpredictability leads to greater risk. It lists several causes of risk such as wrong investment methods, timing, quality/quantity, interest rates, and national/international factors. It also outlines different types of risk like market risk, interest rate risk, and liquidity risk. Finally, it discusses strategies to manage risk such as diversification, avoidance, hedging, retention, and leverage.

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    L-1-Risk managemnt (3)

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    The document discusses financial risk management. It defines risk as the degree of possibility or probability of loss. It notes that higher unpredictability leads to greater risk. It lists several causes of risk such as wrong investment methods, timing, quality/quantity, interest rates, and national/international factors. It also outlines different types of risk like market risk, interest rate risk, and liquidity risk. Finally, it discusses strategies to manage risk such as diversification, avoidance, hedging, retention, and leverage.

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    2 views20 pages

    L-1-Risk Managemnt

    Uploaded by

    khanfaiz4144
    The document discusses financial risk management. It defines risk as the degree of possibility or probability of loss. It notes that higher unpredictability leads to greater risk. It lists several causes of risk such as wrong investment methods, timing, quality/quantity, interest rates, and national/international factors. It also outlines different types of risk like market risk, interest rate risk, and liquidity risk. Finally, it discusses strategies to manage risk such as diversification, avoidance, hedging, retention, and leverage.

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    of 20

    Today Class Topic

    Financial Risk Management

    By
    Dr. Matloob Ullah Khan
    Assistant Professor (Finance)
    Department of Management Studies
    Jamia Hamdard
    (Deemed To be University)
    What is Risk?

    Answer

    “Degree of Possibility OR Probability of Loss”


    Its Potential
    Impact on the
    project
    Higher the unpredictability Greater the Risk

    T H

    All ways Together


    Causes of Risk

    • Wrong Method of Investment


    • Wrong Timing of Investment
    • Wrong Quality & Quantity of investment
    • Interest rate risk
    • Nature of investment instrument
    • Nature of industry
    • Credit worth ness of the issuer
    • Maturity period or length of investment
    • Terms and condition of lending
    • National and international factors
    • Natural disaster & Climate
    Type of Risk

    Systematic Risk Unsystematic Risk Systemic Risk

    • Business Risk
    • Market risk • Financial Risk
    • Interest rate • Default credit
    Risk Risk
    • Purchasing • Operation risk
    power risk • Asset back risk
    • Liquidity risk
    Risk Management strategies

     Diversification

     Avoidance

     Hedging

     Risk Retention
    Leverage

    • Operating leverage

    • Financial Leverage

    • Mechanical leverage
    Impact of Financial Leverage

    • Magnify share holder earning

    • Return on Assets

    • Increase return on Investment

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