经济财务管理外文文献英文文献外文翻译财务风险管理.docx

经济财务管理外文文献英文文献外文翻译财务风险管理.docx

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FinancialRiskManagement

Althoughfinancialriskhasincreasedsignificantlyinrecentyears,riskandriskmanagementarenotcontemporaryissues.Theresultofincreasinglyglobalmarketsisthatriskmayoriginatewitheventsthousandsofmilesawaythathavenothingtodowiththedomesticmarket.Informationisavailableinstantaneously,whichmeansthatchange,andsubsequentmarketreactions,occurveryquickly.Theeconomicclimateandmarketscanbeaffectedveryquicklybychangesinexchangerates,interestrates,andcommodityprices.Counterpartiescanrapidlybecomeproblematic.Asaresult,itisimportanttoensurefinancialrisksareidentifiedandmanagedappropriately.Preparationisakeycomponentofriskmanagement.

WhatIsRisk?

Riskprovidesthebasisforopportunity.Thetermsriskandexposurehavesubtledifferencesintheirmeaning.Riskreferstotheprobabilityofloss,whileexposureisthepossibilityofloss,althoughtheyareoftenusedinterchangeably.Riskarisesasaresultofexposure.

Exposuretofinancialmarketsaffectsmostorganizations,eitherdirectlyorindirectly.Whenanorganizationhasfinancialmarketexposure,thereisapossibilityoflossbutalsoanopportunityforgainorprofit.Financialmarketexposuremayprovidestrategicorcompetitivebenefits.

Riskisthelikelihoodoflossesresultingfromeventssuchaschangesinmarketprices.Eventswithalowprobabilityofoccurring,butthatmayresultinahighloss,areparticularlytroublesomebecausetheyareoftennotanticipated.Putanotherway,riskistheprobablevariabilityofreturns.

Sinceitisnotalwayspossibleordesirabletoeliminaterisk,understandingitisanimportantstepindetermininghowtomanageit. Identifyingexposuresandrisksformsthebasisforanappropriatefinancialriskmanagementstrategy.

HowDoesFinancialRisk?

Financialriskarisesthroughcountlesstransactionsofafinancialnature,includingsalesandpurchases,investmentsandloans,andvariousotherbusinessactivities.Itcanariseasaresultoflegaltransactions,newprojects,mergersand

acquisitions,debtfinancing,theenergycomponentofcosts,orthroughtheactivitiesofmanagement,stakeholders,competitors,foreigngovernments,orweather.Whenfinancialpriceschangedramatically,itcanincreasecosts,reducerevenues,orotherwiseadverselyimpacttheprofitabilityofanorganization.Financialfluctuationsmaymakeitmoredifficulttoplanandbudget,pricegoodsandservices,andallocatecapital.

Therearethreemainsourcesoffinancialrisk:

1.Financialrisksarisingfromanorganization’sexposuretochangesinmarketprices,suchasinterestrates,exchangerates,andcommodityprices.

2.Financialrisksarisingfromtheactionsof,andtransactionswith,otherorganizationssuchasvendors,customers,andcounterpartiesinderivativestransactions

3.Financialrisksresultingfrominternalactionsorfailuresoftheorganization,particularlypeople,processes,andsystems

WhatIsFinancialRiskManagement?

Financialriskmanagementisaprocesstodealwiththeuncertaintiesresultingfromfinancialmarkets.Itinvolvesassessingthefinancialrisksfacinganorganizationanddevelopingmanagementstrategiesconsistentwithinternalprioritiesandpolicies.Addressingfinancialrisksproactivelymayprovideanorganizationwithacompetitiveadvantage.Italsoensuresthatmanagement,operationalstaff,stakeholders,andtheboardofdirectorsareinagreementonkeyissuesofrisk.

Managingfinancialrisknecessitatesmakingorganizationaldecisionsaboutrisksthatareacceptableversusthosethatarenot.Thepassivestrategyoftakingnoactionistheacceptanceofallrisksbydefault.

Organizationsmanagefinancialriskusingavarietyofstrategiesandproducts.Itisimportanttounderstandhowtheseproductsandstrategiesworktoreduceriskwithinthecontextoftheorganization’srisktoleranceandobjectives.

Strategiesforriskmanagementofteninvolvederivatives.Derivativesaretradedwidelyamongfinancialinstitutionsandonorganizedexchanges.Thevalueofderivativescontracts,suchasfutures,forwards,options,andswaps,isderivedfrom

thepriceoftheunderlyingasset.Derivativestradeoninterestrates,exchangerates,commodities,equityandfixedincomesecurities,credit,andevenweather.

Theproductsandstrategiesusedbymarketparticipantstomanagefinancialriskarethesameonesusedbyspeculatorstoincreaseleverageandrisk.Althoughitcanbearguedthatwidespreaduseofderivativesincreasesrisk,theexistenceofderivativesenablesthosewhowishtoreducerisktopassitalongtothosewhoseekriskanditsassociatedopportunities.

Theabilitytoestimatethelikelihoodofafinanciallossishighlydesirable.However,standardtheoriesofprobabilityoftenfailintheanalysisoffinancialmarkets.Risk