Name three types of exposure that derivatives can cover?
- Interest rates
- Foreign exchange rates
Name five factors that will influence the implementation of financial risk management?
- Financial systems & internal controls
- Reporting tools
- Cash budgets
- Credit insurance
- Due diligence
Mitigation of … risk is the payment of debts when they fall due. This can be achieved by using a cash budget.
What are some of the factors that the rate of interest depends on?
What are the benefits of good financial risk management:
- Improves financial planning
- Facilitates robust investment decisions
- Informs hedging decisions
- Encourages monitoring of markets
What does a company need to know before they borrow money?
- How interest rate was determined
- Interest rate at commencement
- Nature of interest rate (fixed or variable)
- Duration of payment
… is the risk to each party of a contract that the counterparty will not live up to its contractual obligations.
… is the mitigation action for credit risk.
… is the financial loss suffered due to the default of a borrower or counterparty under a contract.
… focuses on the possible impact which fluctuations in exchange rates may have on the foreign exchange holdings or the commitments payable in foreign exchange.
… ratio is the relationship between current assets and current liabilities.
… is the probability of the event of default.
… are financial products derived from some other existing product. Examples include options, futures and swaps.
… generally refers to the care a reasonable person should take before entering into an agreement or a transaction with another party.
… relates to the uncertainty surrounding the payment of future amounts.
… is the exposure of an enterprise to adverse events that erode profitability and in extreme situations bring about business collapse.
… risk focuses on the possible risks that arise when a business pursues opportunities abroad.
… is the risk that a business will be unable to obtain funds to meet its obligations as they fall due either by increasing liabilities or by converting assets into money without loss.
… ratio is a liquidity indicator that further refines the current ratio by measuring the amount of the liquid current assets available to cover current liabilities.
… relates to the uncertainty over the likely recovery.