Risk Management

Paper Summary:

This paper explores the importance of risk management tools, such as risk hedging in the modern business environment. The paper also explores quantitative risk management tools most commonly used by firms in the financial service's industry and their advantages.

From the Paper:

"There are clearly differences between risk hedging and risk management. Stonehill Moffett & Eiteman discusses the importance of risk hedging in Fundamentals of Multinational Finance. Risk hedging instruments are primarily used to protect firms against risk. For example, a sack cloth producing company in Bangladesh may buy futures contracts to protect its earnings from a rise in jute prices and this is clearly an example of risk hedging. This is the common context in which risk hedging is looked at; however, I strongly feel that managers should also focus on ways that will allow them to utilize potential risks to their competitive advantage."

Sample of Sources Used:

• Baye, Michael. Managerial Economics and Business Strategy. Singapore: McGraw-Hill/Irwin, 2006.
• Moffet, Stonehill & Eiteman. Fundamentals of Multinational Finance. Adison Wesley, 2005.
• Liaw, K. The Business of Investment Banking. Hoboken, N.J., United States of America: John Wiley & Sons, Inc., 2006
• Wikipedia.com. "Discounted Cash Flow" <http://en.wikipedia.org/> Path: Search: Discounted Cash Flow
• Mittalsteel.com. "Fact Book 2005" <http://www.mittalsteel.com/> Path: Mittal Steel: Investor Relations: Fact Book 2005

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