![]() |
|
Financial Terms | |
Risk management |
Information about financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit.
Main Page: inventory, credit, money, financial, tax advisor, payroll, investment, business, Also see related: condo, credit, financing, home, buy home, property, mortgage, homes, home insurance, |
Definition of Risk managementRisk managementThe process of identifying and evaluating risks and selecting and managing techniques to
Related Terms:HybridA package containing two or more different kinds of risk management instruments that are usually Abusive Earnings ManagementThe use of various forms of gimmickry to distort a company's true financial performance in order to achieve a desired result. Abusive Earnings ManagementA characterization used by the Securities and Exchange activity-based management (ABM)a discipline that focuses on the activities incurred during the production/performance process as the way to improve the value received Asset/liability managementAlso called surplus management, the task of managing funds of a financial Asset-specific RiskThe amount of total risk that can be eliminated by diversification by Bankruptcy riskThe risk that a firm will be unable to meet its debt obligations. Also referred to as default or insolvency risk. ![]() Basis riskThe uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for Beta riskrisk of a firm measured from the standpoint of an investor who holds a highly diversified portfolio. Bottom-up equity management styleA management style that de-emphasizes the significance of economic Business riskThe risk that the cash flow of an issuer will be impaired because of adverse economic Call riskThe combination of cash flow uncertainty and reinvestment risk introduced by a call provision. Cash management billVery short maturity bills that the Treasury occasionally sells because its cash Certified Management Accountant (CMA)a professional designation in the area of management accounting that Commercial riskThe risk that a foreign debtor will be unable to pay its debts because of business events, Company-specific riskRelated: Unsystematic risk Companyspecific RiskSee asset-specific risk Completion riskThe risk that a project will not be brought into operation successfully. Corporate financial managementThe application of financial principals within a corporation to create and cost management system (CMS)a set of formal methods Counterparty riskThe risk that the other party to an agreement will default. In an options contract, the risk Country financial riskThe ability of the national economy to generate enough foreign exchange to meet Country risk GeneralLevel of political and economic uncertainty in a country affecting the value of loans or Credit riskThe risk that an issuer of debt securities or a borrower may default on his obligations, or that the Credit RiskFinancial and moral risk that an obligation will not be paid and a loss will result. Cross-border riskRefers to the volatility of returns on international investments caused by events associated Currency riskRelated: Exchange rate risk Currency risk sharingAn agreement by the parties to a transaction to share the currency risk associated with Default riskAlso referred to as credit risk (as gauged by commercial rating companies), the risk that an Demand Management PolicyFiscal or monetary policy designed to influence aggregate demand for goods and services. Diversifiable riskRelated: unsystematic risk. Earnings ManagementThe active manipulation of earnings toward a predetermined target. Economic riskIn project financing, the risk that the project's output will not be salable at a price that will Equilibrium market price of riskThe slope of the capital market line (CML). Since the CML represents the Event riskThe risk that the ability of an issuer to make interest and principal payments will change because Exchange rate riskAlso called currency risk, the risk of an investment's value changing because of currency Exchange riskThe variability of a firm's value that results from unexpected exchange rate changes or the Fallout riskA type of mortgage pipeline risk that is generally created when the terms of the loan to be Financial riskThe risk that the cash flow of an issuer will not be adequate to meet its financial obligations. financial riskrisk to shareholders resulting from the use of debt. Firm-specific riskSee:diversifiable risk or unsystematic risk. Flat price riskTaking a position either long or short that does not involve spreading. Force majeure riskThe risk that there will be an interruption of operations for a prolonged period after a Foreign exchange riskThe risk that a long or short position in a foreign currency might have to be closed out Funding riskRelated: interest rate risk Geographic riskrisk that arises when an issuer has policies concentrated within certain geographic areas, Herstatt riskThe risk of loss in foreign exchange trading that one party will deliver foreign exchange but the counterparty financial institution will fail to deliver its end of the contract. It is also referred to as settlement risk. High-Risk Small BusinessFirm viewed as being particularly subject to risk from an investors perspective. Idiosyncratic RiskUnsystematic risk or risk that is uncorrelated to the overall market risk. In other words, Inflation riskAlso called purchasing-power risk, the risk that changes in the real return the investor will Insolvency riskThe risk that a firm will be unable to satisfy its debts. Also known as bankruptcy risk. Institute of Management Accountants (IMA)an organization composed of individuals interested in the field of management accounting; it coordinates the Certified management Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest Rate RiskPossibility that interest rates will rise during the term of a loan thereby increasing the annual cost of borrowing. judgmental method (of risk adjustment)an informal method of adjusting for risk that allows the decision maker Liquidity riskThe risk that arises from the difficulty of selling an asset. It can be thought of as the difference Managementmanagement refers to the individuals in an entity that have the authority and the responsibility to manage the entity. The positions of these individuals, and their titles, vary from one entity to another and, to some extent, from one country to another depending on the local laws and customs. Thus, when the context requires it, the term includes the board of directors or committees of the board which are designated to oversee certain matters (e.g., audit committee). Management accountingThe production of financial and non-financial information used in planning for the future; making decisions about products, services, prices and what costs to incur; and ensuring that plans are implemented and achieved. management accountinga discipline that includes almost Management Accounting Guidelines (MAGs)pronouncements of the Society of management Accountants of Management buyout (MBO)Leveraged buyout whereby the acquiring group is led by the firm's management. management buyout (MBO)Acquisition of the firm by its own management in a leveraged buyout. Management/closely held sharesPercentage of shares held by persons closely related to a company, as management controlThis is difficult to define in a few words—indeed, an management control system (MCS)an information system that helps managers gather information about actual organizational occurrences, make comparisons against plans, management expense ratio (MER)The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund. Management feeAn investment advisory fee charged by the financial advisor to a fund based on the fund's management feeThe fee paid to the fund’s manager for supervising the administration of the fund. management information system (MIS)a structure of interrelated elements that collects, organizes, and communicates management stylethe preference of a manager in how he/she interacts with other stakeholders in the organization; Market price of riskA measure of the extra return, or risk premium, that investors demand to bear risk. The Market riskrisk that cannot be diversified away. Related: systematic risk Market RiskThe amount of total risk that cannot be eliminated by portfolio market riskEconomywide (macroeconomic) sources of risk that affect the overall stock market. Also called systematic risk. Market RiskThe part of security's risk that cannot be eliminated by diversification. It is measured by the beta coefficient. market risk premiumrisk premium of market portfolio. Difference between market return and return on risk-free Treasury bills. Money managementRelated: Investment management. Mortgage-pipeline riskThe risk associated with taking applications from prospective mortgage borrowers Nondiversifiable riskrisk that cannot be eliminated by diversification. Nonsystematic riskNonmarket or firm-specific risk factors that can be eliminated by diversification. Also open-book managementa philosophy about increasing a firm’s performance by involving all workers and by ensuring Operating riskThe inherent or fundamental risk of a firm, without regard to financial risk. The risk that is operating risk (business risk)risk in firm’s operating income. Operational Earnings Managementmanagement actions taken in the effort to create stable Overnight delivery riskA risk brought about because differences in time zones between settlement centers Passive investment managementBuying a well-diversified portfolio to represent a broad-based market performance management systema system reflecting the entire package of decisions regarding performance measurement and evaluation Political riskPossibility of the expropriation of assets, changes in tax policy, restrictions on the exchange of Portfolio managementRelated: Investment management Price riskThe risk that the value of a security (or a portfolio) will decline in the future. Or, a type of Product riskA type of mortgage-pipeline risk that occurs when a lender has an unusual loan in production or Purchasing-power riskRelated: inflation risk Rate riskIn banking, the risk that profits may decline or losses occur because a rise in interest rates forces up Real Actions (Earnings) ManagementInvolves operational steps and not simply acceleration Regulatory pricing riskrisk that arises when regulators restrict the premium rates that insurance companies Reinvestment riskThe risk that proceeds received in the future will have to be reinvested at a lower potential Residual riskRelated: unsystematic risk Reverse price riskA type of mortgage-pipeline risk that occurs when a lender commits to sell loans to an RiskTypically defined as the standard deviation of the return on total investment. Degree of uncertainty of Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |