财务风险管理外文翻译
财务风险管理外文文献翻译
文献出处: Sharifi, Omid. International Journal of Information, Business and Management6.2 (May 2014): 82-94.原文Financial Risk Management for Small and Medium Sized Enterprises(SMES)Omid SharifiMBA, Department of Commerce and Business Management,Kakatiya University, House No. 2-1-664, Sarawathi negar,1.ABSTRACTmedium sized Enterprises (SME) do also face business risks, Similar to large companies, Small and Mwhich in worst case can cause financial distress and lead to bankruptcy. However, although SME are a major part of the India and also international - economy, research mainly focused on risk management in large corporations. Therefore the aim of this paper is to suggest a possible mean for the risk identification, analysis and monitoring, which can be applied by SME to manage their internal financial risks. For this purpose the financial analysis, which has been used in research to identify indicators for firm bankruptcy, was chosen. The data required for the study was collected from Annual report of the Intec Capital Limited. For the period of five years, from 2008 to 2012.the findings showed the data and the overview can be used in SME risk management.Keywords: Annual report, Small and Medium sized Enterprises, Financial Risks, Risk Management.2.INTRUDUCTIONSmall and medium sized enterprises (SME) differ from large corporations among other aspects first of all in their size. Their importance in the economy however is large . SME sector of India is considered as the backbone of economy contributing to 45% of the industrial output, 40% of India’s exports, employing 60 million people,create 1.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets. With approximately 30 million SMEs in India, 12 million people expected to join the workforce in next 3 years and the sector growing at a rate of 8% per year, Government of India is taking different measures so as to increase their competitiveness in the international market. There are several factors that have contributed towards the growth of Indian SMEs.Few of these include; funding of SMEs by local and foreign investors, the new technology that is used in the market is assisting SMEs add considerable value to their business, various trade directories and trade portals help facilitate trade between buyer and supplier and thus reducing the barrier to trade With this huge potential, backed up by strong government support; Indian SMEs continue to post their growth stories. Despite of this strong growth, there is huge potential amongst Indian SMEs that still remains untapped. Once this untapped potential becomes the source for growth of these units, there would be no stopping to India posting a GDP higher than that of US and China and becoming the world’s economic powerhouse.3. RESEARCH QUESTIONRisk and economic activity are inseparable. Every business decision and entrepreneurial act is connected with risk. This applies also to business of small andmedium sized enterprises as they are also facing several and often the same risks as bigger companies. In a real business environment with market imperfections they need to manage those risks in order to secure their business continuity and add additional value by avoiding or reducing transaction costs and cost of financial distress or bankruptcy. However, risk management is a challenge for most SME. In contrast to larger companies they often lack the necessary resources, with regard to manpower, databases and specialty of knowledge to perform a standardized and structured risk management. The result is that many smaller companies do not perform sufficient analysis to identify their risk. This aspect is exacerbated due to a lack in literature about methods for risk management in SME, as stated by Henschel: The two challenging aspects with regard to risk management in SME are therefore:1. SME differ from large corporations in many characteristics2. The existing research lacks a focus on risk management in SMEThe following research question will be central to this work:1.how can SME manage their internal financial risk?2.Which aspects, based on their characteristics, have to be taken into account for this?3.Which mean fulfils the requirements and can be applied to SME?4. LITERATURE REVIEWIn contrast to larger corporations, in SME one of the owners is often part of the management team. His intuition and experience are important for managing the company.Therefore, in small companies, the (owner-) manager is often responsible for many different tasks and important decisions. Most SME do not have the necessary resources to employ specialists on every position in the company. They focus on their core business and have generalists for the administrative functions. Behr and Guttler find that SME on average have equity ratios lower than 20%. The different characteristics of management, position on procurement and capital markets and the legal framework need to be taken into account when applying management instruments like risk management. Therefore the risk management techniques of larger corporations cannot easily be applied to SME.In practice it can therefore be observed that although SME are not facing less risks and uncertainties than largecompanies, their risk management differs from the practices in larger companies. The latter have the resources to employ a risk manager and a professional, structured and standardized risk management system. In contrast to that, risk management in SME differs in the degree of implementation and the techniques applied. Jonen & Simgen-Weber With regard to firm size and the use of risk management. Beyer, Hachmeister & Lampenius observe in a study from 2010 that increasing firm size among SME enhances the use of risk management. This observation matches with the opinion of nearly 10% of SME, which are of the opinion, that risk management is only reasonable in larger corporations. Beyer, Hachmeister & Lampenius find that most of the surveyed SME identify risks with help of statistics, checklists, creativity and scenario analyses. reveals similar findings and state that most companies rely on key figure systems for identifying and evaluating the urgency of business risks. That small firms face higher costs of hedging than larger corporations. This fact is reducing the benefits from hedging and therefore he advises to evaluate the usage of hedging for each firm individually. The lacking expertise to decide about hedges in SME is also identified by Eckbo, According to his findings, smaller companies often lack the understanding and management capacities needed to use those instruments.5. METHODOLOGY5.1. USE OF FINANCIAL ANALYSIS IN SME RISK MANAGEMENTHow financial analysis can be used in SME risk management?5.1.1 Development of financial risk overview for SMEThe following sections show the development of the financial risk overview. After presenting the framework, the different ratios will be discussed to finally presenta selection of suitable ratios and choose appropriate comparison data.5.1.2. Framework for financial risk overviewThe idea is to use a set of ratios in an overview as the basis for the financial risk management.This provides even more information than the analysis of historical data and allows reacting fast on critical developments and managing the identified risks. However not only the internal data can be used for the risk management. In additionto that also the information available in the papers can be used.Some of them state average values for the defaulted or bankrupt companies one year prior bankruptcy -and few papers also for a longer time horizon. Those values can be used as a comparison value to evaluate the risk situation of the company. For this an appropriate set of ratios has to be chosen.The ratios, which will be included in the overview and analysis sheet, should fulfill two main requirements. First of all they should match the main financial risks of the company in order to deliver significant information and not miss an important risk factor. Secondly the ratios need to be relevant in two different ways. On the one hand they should be applicable independently of other ratios. This means that they also deliver useful information when not used in a regression, as it is applied in many of the papers. On the other hand to be appropriate to use them, the ratios need to show a different development for healthy companies than for those under financial distress. The difference between the values of the two groups should be large enough to see into which the observed company belongs.5.1.3. Evaluation of ratios for financial risk overviewWhen choosing ratios from the different categories, it needs to be evaluated which ones are the most appropriate ones. For this some comparison values are needed in order to see whether the ratios show different values and developments for the two groups of companies. The most convenient source for the comparison values are the research papers as their values are based on large samples of annual reports and by providing average values outweigh outliers in the data. Altman shows a table with the values for 8 different ratios for the five years prior bankruptcy of which he uses 5, while Porporato & Sandin use 13 ratios in their model and Ohlson bases his evaluation on 9 figures and ratios [10]. Khong, Ong & Yap and Cerovac & Ivicic also show the difference in ratios between the two groups, however only directly before bankruptcy and not as a development over time [9]. Therefore this information is not as valuable as the others ([4][15]).In summary, the main internal financial risks in a SME should be covered by financial structure, liquidity and profitability ratios, which are the main categories ofratios applied in the research papers.Financial structureA ratio used in many of the papers is the total debt to total assets ratio, analyzing the financial structure of the company. Next to the papers of Altman, Ohlson and Porporato & Sandin also Khong, Ong & Yap and Cerovac & Ivicic show comparison values for this ratio. Those demonstrate a huge difference in size between the bankrupt and non-bankrupt groups.Figure 1: Development of total debt/ total assets ratioData source: Altman (1968), Porporato & Sandin (2007) and Ohlson (1980), author’s illustrationTherefore the information of total debt/total assets is more reliable and should rather be used for the overview. The other ratios analyzing the financial structure are only used in one of the papers and except for one the reference data only covers the last year before bankruptcy. Therefore a time trend cannot be detected and their relevance cannot be approved.Cost of debtThe costs of debt are another aspect of the financing risk. Porporato & Sandin use the variable interest payments/EBIT for measuring the debt costs. The variable shows how much of the income before tax and interest is spend to finance the debt. This variable also shows a clear trend when firms approach bankruptcy.LiquidityThe ratio used in all five papers to measure liquidity is the current ratio, showingthe relation between current liabilities and current assets (with slight differences in the definition). Instead of the current ratio, a liquidity ratio setting the difference between current assets and current liabilities, also defined as working capital, into relation with total assets could be used.Figure 2: Development of working capital / total assets ratioData source: Altman (1968) and Ohlson (1980); author’s illustratioBasically the ratio says whether the firm would be able to pay back all its’ current liabilities by using its’ current assets. In case it is not able to, which is wh en the liabilities exceed the assets, there is an insolvency risk.6. CRITICAL REVIEW AND CONCLUSIONWhen doing business, constantly decisions have to be made, whose outcome is not certain and thus connected with risk. In order to successfully cope with this uncertainty, corporate risk management is necessary in a business environment, which is influenced by market frictions. Different approaches and methods can be found for applying such a risk management. However, those mainly focus on large corporations, though they are the minority of all companies[13].Furthermore the approaches often require the use of statistical software and expert knowledge, which is most often not available in SME. They and their requirements for risk management have mainly been neglected [17][13].This also includes the internal financial risk management, which was in the focus of this paper. Due to the existing risks in SME and their differences to larger corporations as well as the lack of suitable risk management suggestions in theory, there is a need for a suggestion for a financial risk management in SME. Theaim was to find a possible mean for the risk identification, analysis and monitoring, which can be applied by SME to manage their internal financial risks. For this purpose the financial analysis, which has been used in research to identify indicators for firm bankruptcy, was chosen. Based on an examination and analysis of different papers, despite of their different models, many similarities in the applied ratios could be identified. In general the papers focus on three categories of risk, namely liquidity, profitability and solvency, which are in accordance to the main internal financial risks of SME. From the ratios the most appropriate ones with regard to their effectiveness in identifying risks.译文中小企业的财务风险管理奥米德沙利菲1、摘要中小型企业(SME)和大型企业一样,也面临着业务风险,在最糟糕的情况下,可能会导致金融危机,甚至破产。
中小企业的财务风险管理外文文献翻译2014年译文3000字
中小企业的财务风险管理外文文献翻译2014年译文3000字Financial Risk Management for Small and Medium-Sized Enterprises (SMEs)Financial risk management is an essential aspect of business management。
particularly for small and medium-sized enterprises (SMEs)。
SMEs face numerous financial risks。
including credit risk。
market risk。
liquidity risk。
and nal risk。
which can significantly impact their financial stability and growth prospects。
Therefore。
the effective management of financial risks is crucialfor SMEs to survive and thrive in today's competitive business environment.One of the primary challenges for SMEs in managing financial risks is their limited resources and expertise。
Unlike large ns。
SMEs often lack the financial resources and specialized staff to develop and implement comprehensive risk management strategies。
As a result。
财务风险管理外文文献翻译原文+译文
财务风险管理外文文献翻译原文+译文财务风险管理外文文献翻译原文+译文【2016年8月】目录原文:Financial Risk ManagementAlthough financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originate with events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequent market reactions, occur very quickly. The economic climate and markets can be affected very quickly by changes in exchange rates, interest rates, and commodity prices. Counterparties can rapidly become problematic. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of risk management.What Is Risk?Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as a result of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit. Financial market exposure may provide strategic or competitive benefits.Risk is the likelihood of losses resulting from events such aschanges in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated. Put another way, risk is the probable variability of returns.Since it is not always possible or desirable to eliminate risk, understanding it is an important step in determining how to manage it. Identifying exposures and risks forms the basis for an appropriate financial risk management strategy.How Does Financial Risk?Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stakeholders, competitors, foreign governments, or weather. When financial prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget, price goods and services, and allocate capital.There are three main sources of financial risk:1. Financial risks arising from an organization’s exposure to changes in market prices, such as interest rates, exchange rates, and commodity prices.2. Financial risks arising from the actions of, and transactions with, other organizations such as vendors, customers, and counterparties in derivatives transactions3. Financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systems What Is Financial Risk Management?Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitates making organizational decisions about risks that are acceptable versus those that are not. The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies and products. It is important to understand how these products and strategies work to reduce risk within the context of the organization’s risk tolerance and objectives.Strategies for risk management often involve derivatives. Derivatives are traded widely among financial institutions and on organized exchanges. The value of derivatives contracts, such as futures, forwards, options, and swaps, is derived from the price of the underlying asset. Derivatives trade on interest rates, exchange rates, commodities, equity and fixed income securities, credit, and even weather.The products and strategies used by market participants to manage financial risk are the same ones used by speculators to increase leverage and risk. Although it can be argued that widespread use of derivatives increases risk, the existence of derivatives enables those who wish to reduce risk to pass it along to those who seek risk and its associated opportunities.The ability to estimate the likelihood of a financial loss ishighly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows:1、Identify and prioritize key financial risks.2、Determine an appropriate level of risk tolerance.3、Implement risk management strategy in accordance with policy.4、Measure, report, monitor, and refine as needed.DiversificationFor many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modern portfolio theory considers not only an asset’s riskines s, but also its contribution to the overall riskiness of the portfolio to which it is added. Organizations may have an opportunity to reduce risk as a result ofrisk diversification.In portfolio management terms, the addition of individual components to a portfolio provides opportunities for diversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of theexposures of an organization as a portfolio and consider the impact of changes or additions on the potential risk of the total.Diversification is an important tool in managing financial risks. Diversification among counterparties may reduce the risk that unexpected events adversely impact the organization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails. Diversification of customers, suppliers, and financing sources reduces the possibility that an organization will have its business adversely affected by changes outside management’s control. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outcomes.Risk Management ProcessThe process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, legal, tax, commodity, and corporate finance.The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing the financial risks facing an organization and understanding their relevance. It may be necessary to examine the organization and its products, management, customers, suppliers, competitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk.Once a clear understanding of the risks emerges, appropriate strategies can be implemented in conjunction with riskmanagement policy. For example, it might be possible to change where and how business is done, thereby reducing the。
财务风险管控英语缩写
财务风险管控英语缩写1. 引言财务风险是企业在经营过程中面临的一种不确定性,可能会对企业的财务状况和经营结果产生负面影响。
为了有效地管理和控制财务风险,人们普遍采用了一系列的英语缩写词汇来描述相关的概念和措施。
本文将介绍一些常用的财务风险管控英语缩写,并解释其含义和用途。
2. 财务风险管控英语缩写列表以下是一些常见的财务风险管控英语缩写词汇:2.1. ERM - Enterprise Risk ManagementERM是企业风险管理的英文缩写,是一种将风险管理纳入企业战略和运营决策中的综合性方法。
ERM旨在识别、评估和应对企业面临的各种风险,包括财务风险、市场风险、操作风险等。
通过实施ERM,企业可以更好地管理和控制财务风险。
2.2. FRA - Financial Risk AssessmentFRA是财务风险评估的英文缩写,指的是对企业财务风险进行评估和分析的过程。
通过FRA,企业可以了解其面临的财务风险程度和潜在的影响因素,有助于制定相应的风险管理和控制策略。
2.3. VAR - Value at RiskVAR是风险价值的英文缩写,是一种衡量财务风险的指标。
VAR表示在给定的置信水平下,企业可能遭受的最大亏损金额。
通过计算VAR,企业可以评估其财务风险承受能力,并采取相应的措施来控制风险。
2.4. IPO - Initial Public OfferingIPO是首次公开发行的英文缩写,指的是企业将股份首次向公众出售的过程。
IPO可能会带来一定的财务风险,包括市场波动、股价下跌等。
因此,企业在进行IPO时需要进行财务风险管理和控制。
2.5. CFO - Chief Financial OfficerCFO是首席财务官的英文缩写,是企业负责财务管理和风险管控的高级管理人员。
CFO负责制定和执行财务战略,管理财务风险,确保企业的财务稳定和可持续发展。
2.6. SOX - Sarbanes-Oxley ActSOX是萨班斯-奥克斯利法案的英文缩写,是美国国会于2002年通过的一项法律。
中小企业的财务风险管理外文文献翻译2014年译文3000字
文献出处:Sharifi, Omid. International Journal of Information, Business and Management 6.2 (May 2014): 82-94.2014年,最新文献翻译,译文3000多字原文Financial Risk Management for Small and Medium SizedEnterprises(SMES)Omid SharifiMBA, Department of Commerce and Business Management,Kakatiya University, House No. 2-1-664, Sarawathi negar,Gopalpur, Hanamakonda, A.P., IndiaE-Mail: **********************, Phone: 0091- 8808173339RESEARCH QUESTIONRisk and economic activity are inseparable. Every business decision and entrepreneurial act is connected with risk. This applies also to business of small and medium sized enterprises as they are also facing several and often the same risks as bigger companies. In a real business environment with market imperfections they need to manage those risks in order to secure their business continuity and add additional value by avoiding or reducing transaction costs and cost of financial distress or bankruptcy. However, risk management is a challenge for most SME. In contrast to larger companies they often lack the necessary resources, with regard to manpower, databases and specialty of knowledge to perform a standardized and structured risk management. The result is that many smaller companies do not perform sufficient analysis to identify their risk. This aspect is exacerbated due to a lack in literature about methods for risk management in SME, as stated by Henschel: The two challenging aspects with regard to risk management in SME are therefore:1. SME differ from large corporations in many characteristics2. The existing research lacks a focus on risk management in SMEThe following research question will be central to this work:1.how can SME manage their internal financial risk?2.Which aspects, based on their characteristics, have to be taken into account for this?3.Which mean fulfils the requirements and can be applied to SME? LITERATURE REVIEWIn contrast to larger corporations, in SME one of the owners is often part of the management team. His intuition and experience are important for managing the company.Therefore, in small companies, the (owner-) manager is often responsible for many different tasks and important decisions. Most SME do not have the necessary resources to employ specialists on every position in the company. They focus on their core business and have generalists for the administrative functions. Behr and Guttler find that SME on average have equity ratios lower than 20%. The different characteristics of management, position on procurement and capital markets and the legal framework need to be taken into account when applying management instruments like risk management. Therefore the risk management techniques of larger corporations cannot easily be applied to SME.In practice it can therefore be observed that although SME are not facing less risks and uncertainties than large companies, their risk management differs from the practices in larger companies. The latter have the resources to employ a risk manager and a professional, structured and standardized risk management system. In contrast to that, risk management in SME differs in the degree of implementation and the techniques applied. Jonen & Simgen-Weber With regard to firm size and the use of risk management. Beyer, Hachmeister & Lampenius observe in a study from 2010 that increasing firm size among SME enhances the use of risk management. This observation matches with the opinion of nearly 10% of SME, which are of the opinion, that risk management is only reasonable in larger corporations. Beyer,Hachmeister & Lampenius find that most of the surveyed SME identify risks with help of statistics, checklists, creativity and scenario analyses. reveals similar findings and state that most companies rely on key figure systems for identifying and evaluating the urgency of business risks. That small firms face higher costs of hedging than larger corporations. This fact is reducing the benefits from hedging and therefore he advises to evaluate the usage of hedging for each firm individually. The lacking expertise to decide about hedges in SME is also identified by Eckbo, According to his findings, smaller companies often lack the understanding and management capacities needed to use those instruments.METHODOLOGYUSE OF FINANCIAL ANALYSIS IN SME RISK MANAGEMENTHow financial analysis can be used in SME risk management?Development of financial risk overview for SMEThe following sections show the development of the financial risk overview. After presenting the framework, the different ratios will be discussed to finally present a selection of suitable ratios and choose appropriate comparison data. Framework for financial risk overviewThe idea is to use a set of ratios in an overview as the basis for the financial risk management.This provides even more information than the analysis of historical data and allows reacting fast on critical developments and managing the identified risks. However not only the internal data can be used for the risk management. In addition to that also the information available in the papers can be used.Some of them state average values for the defaulted or bankrupt companies one year prior bankruptcy -and few papers also for a longer time horizon. Those values can be used as a comparison value to evaluate the risk situation of the company. For this an appropriate set of ratios has to be chosen.The ratios, which will be included in the overview and analysis sheet, should fulfill two main requirements. First of all they should match the main financial risks of the company in order to deliver significant information and not miss an importantrisk factor. Secondly the ratios need to be relevant in two different ways. On the one hand they should be applicable independently of other ratios. This means that they also deliver useful information when not used in a regression, as it is applied in many of the papers. On the other hand to be appropriate to use them, the ratios need to show a different development for healthy companies than for those under financial distress. The difference between the values of the two groups should be large enough to see into which the observed company belongs.Evaluation of ratios for financial risk overviewWhen choosing ratios from the different categories, it needs to be evaluated which ones are the most appropriate ones. For this some comparison values are needed in order to see whether the ratios show different values and developments for the two groups of companies. The most convenient source for the comparison values are the research papers as their values are based on large samples of annual reports and by providing average values outweigh outliers in the data. Altman shows a table with the values for 8 different ratios for the five years prior bankruptcy of which he uses 5, while Porporato & Sandin use 13 ratios in their model and Ohlson bases his evaluation on 9 figures and ratios [10]. Khong, Ong & Yap and Cerovac & Ivicic also show the difference in ratios between the two groups, however only directly before bankruptcy and not as a development over time [9]. Therefore this information is not as valuable as the others ([4][15]).In summary, the main internal financial risks in a SME should be covered by financial structure, liquidity and profitability ratios, which are the main categories of ratios applied in the research papers.Financial structureA ratio used in many of the papers is the total debt to total assets ratio, analyzing the financial structure of the company. Next to the papers of Altman, Ohlson and Porporato & Sandin also Khong, Ong & Yap and Cerovac & Ivicic show comparison values for this ratio. Those demonstrate a huge difference in size between the bankrupt and non-bankrupt groups.Figure 1: Development of total debt/ total assets ratioData source: Altman (1968), Porporato & Sandin (2007) and Ohlson (1980), author’s illustrationTherefore the information of total debt/total assets is more reliable and should rather be used for the overview. The other ratios analyzing the financial structure are only used in one of the papers and except for one the reference data only covers the last year before bankruptcy. Therefore a time trend cannot be detected and their relevance cannot be approved.Cost of debtThe costs of debt are another aspect of the financing risk. Porporato & Sandin use the variable interest payments/EBIT for measuring the debt costs. The variable shows how much of the income before tax and interest is spend to finance the debt. This variable also shows a clear trend when firms approach bankruptcy.LiquidityThe ratio used in all five papers to measure liquidity is the current ratio, showing the relation between current liabilities and current assets (with slight differences in the definition). Instead of the current ratio, a liquidity ratio setting the difference between current assets and current liabilities, also defined as working capital, into relation with total assets could be used.Figure 2: Development of working capital / total assets ratioData source: Altman (1968) and Ohlson (1980); author’s illustratioBasically the ratio says whether the firm would be able to pay back all its’ current liabilities by using its’ current assets. In case it is not able to, which is when the liabilities exceed the assets, there is an insolvency risk.ProfitabilityFor measuring the firms’ profitability or productivity a wide range of ratios is used in the different papers. The ratio sales /total assets is used as well by as also Porporato & Sandin (they use total assets / sales, which can easily be transformed to be comparable) and therefore available as a time series.Figure 3: Development of sales / total assets ratioData source: Altman (1968) and Porporato & Sandin (2007), author’s illustratioThe remaining ratios measuring the last period’s profitability are net income / equity, EBIT /debt and net income or EBIT / total assets.The last groups of profitability ratios, which can be found in the literature, are those focusing on retained earnings of the firms. These measures show the cumulated profitability of the firm over time.Retained earnings ratios measure the buffer of funds the company was able to earn over time and which can be used in times of crisis to balance losses.译文中小企业的财务风险管理Omid Sharifi研究问题风险与经济活动是密不可分的。
财务风险管理中英文对照外文翻译文献
中英文资料翻译Financial Risk ManagementAlthough financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originate with events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequent market reactions, occur very quickly. The economic climate and markets can be affected very quickly by changes in exchange rates, interest rates, and commodity prices. Counterparties can rapidly become problematic. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of risk management.What Is Risk?Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as a result of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit. Financial market exposure may provide strategic or competitive benefits.Risk is the likelihood of losses resulting from events such as changes in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated. Put another way, risk is the probable variability of returns.Since it is not always possible or desirable to eliminate risk, understanding it is an important step in determining how to manage it. Identifying exposures and risks forms the basis for an appropriate financial risk management strategy.How Does Financial Risk?Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stakeholders, competitors, foreign governments, or weather. When financial prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget, price goods and services, and allocate capital.There are three main sources of financial risk:1. Financial risks arising from an organization’s exposure to changes in market prices, such as interest rates, exchange rates, and commodity prices.2. Financial risks arising from the actions of, and transactions with, other organizations such as vendors, customers, and counterparties in derivatives transactions3. Financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systemsWhat Is Financial Risk Management?Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitates making organizational decisions about risks that are acceptable versus those that are not. The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies and products. It is important to understand how these products and strategies work to reduce riskwithin the context of the organization’s risk tolerance and objectives.Strategies for risk management often involve derivatives. Derivatives are traded widely among financial institutions and on organized exchanges. The value of derivatives contracts, such as futures, forwards, options, and swaps, is derived from the price of the underlying asset. Derivatives trade on interest rates, exchange rates, commodities, equity and fixed income securities, credit, and even weather.The products and strategies used by market participants to manage financial risk are the same ones used by speculators to increase leverage and risk. Although it can be argued that widespread use of derivatives increases risk, the existence of derivatives enables those who wish to reduce risk to pass it along to those who seek risk and its associated opportunities.The ability to estimate the likelihood of a financial loss is highly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows:1、Identify and prioritize key financial risks.2、Determine an appropriate level of risk tolerance.3、Implement risk management strategy in accordance with policy.4、Measure, report, monitor, and refine as needed.DiversificationFor many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modern portfolio theory considers not only an asset’s riskiness, but also its contribution to the overall riskiness of the portfolio towhich it is added. Organizations may have an opportunity to reduce risk as a result of risk diversification.In portfolio management terms, the addition of individual components to a portfolio provides opportunities for diversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of the exposures of an organization as a portfolio and consider the impact of changes or additions on the potential risk of the total.Diversification is an important tool in managing financial risks. Diversification among counterparties may reduce the risk that unexpected events adversely impact the organization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails. Diversification of customers, suppliers, and financing sources reduces the possibility that an organization will have its business adversely affected by changes outside management’s control. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outcomes.Risk Management ProcessThe process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, legal, tax, commodity, and corporate finance.The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing the financial risks facing an organization and understanding their relevance. It may be necessary to examine the organization and its products, management, customers, suppliers, competitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk.Once a clear understanding of the risks emerges, appropriate strategies can be implemented in conjunction with risk management policy. For example, it might bepossible to change where and how business is done, thereby reducing the organization’s exposure and risk. Alternatively, existing exposures may be managed with derivatives. Another strategy for managing risk is to accept all risks and the possibility of losses.There are three broad alternatives for managing risk:1. Do nothing and actively, or passively by default, accept all risks.2. Hedge a portion of exposures by determining which exposures can and should be hedged.3. Hedge all exposures possible.Measurement and reporting of risks provides decision makers with information to execute decisions and monitor outcomes, both before and after strategies are taken to mitigate them. Since the risk management process is ongoing, reporting and feedback can be used to refine the system by modifying or improving strategies.An active decision-making process is an important component of risk management. Decisions about potential loss and risk reduction provide a forum for discussion of important issues and the varying perspectives of stakeholders.Factors that Impact Financial Rates and PricesFinancial rates and prices are affected by a number of factors. It is essential to understand the factors that impact markets because those factors, in turn, impact the potential risk of an organization.Factors that Affect Interest RatesInterest rates are a key component in many market prices and an important economic barometer. They are comprised of the real rate plus a component for expected inflation, since inflation reduces the purchasing power of a lender’s assets .The greater the term to maturity, the greater the uncertainty. Interest rates are also reflective of supply and demand for funds and credit risk.Interest rates are particularly important to companies and governments because they are the key ingredient in the cost of capital. Most companies and governments require debt financing for expansion and capital projects. When interest rates increase, the impact can be significant on borrowers. Interest rates also affect prices in otherfinancial markets, so their impact is far-reaching.Other components to the interest rate may include a risk premium to reflect the creditworthiness of a borrower. For example, the threat of political or sovereign risk can cause interest rates to rise, sometimes substantially, as investors demand additional compensation for the increased risk of default.Factors that influence the level of market interest rates include:1、Expected levels of inflation2、General economic conditions3、Monetary policy and the stance of the central bank4、Foreign exchange market activity5、Foreign investor demand for debt securities6、Levels of sovereign debt outstanding7、Financial and political stabilityYield CurveThe yield curve is a graphical representation of yields for a range of terms to maturity. For example, a yield curve might illustrate yields for maturity from one day (overnight) to 30-year terms. Typically, the rates are zero coupon government rates.Since current interest rates reflect expectations, the yield curve provides useful information about the market’s expectations of future interest rates. Implied interest rates for forward-starting terms can be calculated using the information in the yield curve. For example, using rates for one- and two-year maturities, the expected one-year interest rate beginning in one year’s time can be determined.The shape of the yield curve is widely analyzed and monitored by market participants. As a gauge of expectations, it is often considered to be a predictor of future economic activity and may provide signals of a pending change in economic fundamentals.The yield curve normally slopes upward with a positive slope, as lenders/investors demand higher rates from borrowers for longer lending terms. Since the chance of a borrower default increases with term to maturity, lenders demand to be compensated accordingly.Interest rates that make up the yield curve are also affected by the expected rate of inflation. Investors demand at least the expected rate of inflation from borrowers, in addition to lending and risk components. If investors expect future inflation to be higher, they will demand greater premiums for longer terms to compensate for this uncertainty. As a result, the longer the term, the higher the interest rate (all else being equal), resulting in an upward-sloping yield curve.Occasionally, the demand for short-term funds increases substantially, and short-term interest rates may rise above the level of longer term interest rates. This results in an inversion of the yield curve and a downward slope to its appearance. The high cost of short-term funds detracts from gains that would otherwise be obtained through investment and expansion and make the economy vulnerable to slowdown or recession. Eventually, rising interest rates slow the demand for both short-term and long-term funds. A decline in all rates and a return to a normal curve may occur as a result of the slowdown.财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。
财务风险管理外文文献翻译译文
Financial Risk ManagementAlthough financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originate with events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequent market reactions, occur very quickly. The economic climate and markets can be affected very quickly by changes in exchange rates, interest rates, and commodity prices. Counterparties can rapidly become problematic. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of risk management.What Is Risk?Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as a result of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit. Financial market exposure may provide strategic or competitive benefits.Risk is the likelihood of losses resulting from events such as changes in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated. Put another way, risk is the probable variability of returns.Since it is not always possible or desirable to eliminate risk,understanding it is an important step in determining how to manage it. Identifying exposures and risks forms the basis for an appropriate financial risk management strategy.How Does Financial Risk?Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stakeholders, competitors, foreign governments, or weather. When financial prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget, price goods and services, and allocate capital.There are three main sources of financial risk:1. Financial risks arising from an organization’s exposure to changes in market prices, such as interest rates, exchange rates, and commodity prices.2. Financial risks arising from the actions of, and transactions with, other organizations such as vendors, customers, and counterparties in derivatives transactions3. Financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systemsWhat Is Financial Risk Management?Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent withinternal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitates making organizational decisions about risks that are acceptable versus those that are not. The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies and products. It is important to understand how these products and strategies work to reduce risk within the context of the organization’s risk tolerance and objectives.Strategies for risk management often involve derivatives. Derivatives are traded widely among financial institutions and on organized exchanges. The value of derivatives contracts, such as futures, forwards, options, and swaps, is derived from the price of the underlying asset. Derivatives trade on interest rates, exchange rates, commodities, equity and fixed income securities, credit, and even weather.The products and strategies used by market participants to manage financial risk are the same ones used by speculators to increase leverage and risk. Although it can be argued that widespread use of derivatives increases risk, the existence of derivatives enables those who wish to reduce risk to pass it along to those who seek risk and its associated opportunities.The ability to estimate the likelihood of a financial loss is highly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and theinteractions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows:1、Identify and prioritize key financial risks.2、Determine an appropriate level of risk tolerance.3、Implement risk management strategy in accordance with policy.4、Measure, report, monitor, and refine as needed.DiversificationFor many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modern portfolio theory considers not only an asset’s riskiness, but also its contribution to the overall riskiness of the portfolio to which it is added. Organizations may have an opportunity to reduce risk as a result of risk diversification.In portfolio management terms, the addition of individual components to a portfolio provides opportunities for diversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of the exposures of an organization as a portfolio and consider the impact of changes or additions on the potential risk of the total.Diversification is an important tool in managing financial risks.Diversification among counterparties may reduce the risk that unexpected events adversely impact the organization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails. Diversification of customers, suppliers, and financing sources reduces the possibility that an organization will have its business adversely affected by changes outside management’s control. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outcomes.Risk Management ProcessThe process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, legal, tax, commodity, and corporate finance.The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing the financial risks facing an organization and understanding their relevance. It may be necessary to examine the organization and its products, management, customers, suppliers, competitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk.Once a clear understanding of the risks emerges, appropriate strategies can be implemented in conjunction with risk management policy. For example, it might be possible to change where and how business is done, thereby reducing the organization’s exposure and risk. Alternatively, existingexposures may be managed with derivatives. Another strategy for managing risk is to accept all risks and the possibility of losses.There are three broad alternatives for managing risk:1. Do nothing and actively, or passively by default, accept all risks.2. Hedge a portion of exposures by determining which exposures can and should be hedged.3. Hedge all exposures possible.Measurement and reporting of risks provides decision makers with information to execute decisions and monitor outcomes, both before and after strategies are taken to mitigate them. Since the risk management process is ongoing, reporting and feedback can be used to refine the system by modifying or improving strategies.An active decision-making process is an important component of risk management. Decisions about potential loss and risk reduction provide a forum for discussion of important issues and the varying perspectives of stakeholders.Factors that Impact Financial Rates and PricesFinancial rates and prices are affected by a number of factors. It is essential to understand the factors that impact markets because those factors, in turn, impact the potential risk of an organization.Factors that Affect Interest RatesInterest rates are a key component in many market prices and an important economic barometer. They are comprised of the real rate plus a component for expected inflation, since inflation reduces the purchasing power of a lender’s assets .The greater the term to maturity, the greater theuncertainty. Interest rates are also reflective of supply and demand for funds and credit risk.Interest rates are particularly important to companies and governments because they are the key ingredient in the cost of capital. Most companies and governments require debt financing for expansion and capital projects. When interest rates increase, the impact can be significant on borrowers. Interest rates also affect prices in other financial markets, so their impact is far-reaching.Other components to the interest rate may include a risk premium to reflect the creditworthiness of a borrower. For example, the threat of political or sovereign risk can cause interest rates to rise, sometimes substantially, as investors demand additional compensation for the increased risk of default.Factors that influence the level of market interest rates include:1、Expected levels of inflation2、General economic conditions3、Monetary policy and the stance of the central bank4、Foreign exchange market activity5、Foreign investor demand for debt securities6、Levels of sovereign debt outstanding7、Financial and political stabilityYield CurveThe yield curve is a graphical representation of yields for a range of terms to maturity. For example, a yield curve might illustrate yields for maturity from one day (overnight) to 30-year terms. Typically, the rates are zero coupon government rates.Since current interest rates reflect expectations, the yield curve provides useful information about the market’s expectations of future interest rates. Implied interest rates for forward-starting terms can be calculated using the information in the yield curve. For example, using rates for one- and two-year maturities, the expected one-year interest rate beginning in one year’s time can be determined.The shape of the yield curve is widely analyzed and monitored by market participants. As a gauge of expectations, it is often considered to be a predictor of future economic activity and may provide signals of a pending change in economic fundamentals.The yield curve normally slopes upward with a positive slope, as lenders/investors demand higher rates from borrowers for longer lending terms. Since the chance of a borrower default increases with term to maturity, lenders demand to be compensated accordingly.Interest rates that make up the yield curve are also affected by the expected rate of inflation. Investors demand at least the expected rate of inflation from borrowers, in addition to lending and risk components. If investors expect future inflation to be higher, they will demand greater premiums for longer terms to compensate for this uncertainty. As a result, the longer the term, the higher the interest rate (all else being equal), resulting in an upward-sloping yield curve.Occasionally, the demand for short-term funds increases substantially, and short-term interest rates may rise above the level of longer term interest rates. This results in an inversion of the yield curve and a downward slope to its appearance. The high cost of short-term funds detracts from gains that would otherwise be obtained through investment and expansion and make the economyvulnerable to slowdown or recession. Eventually, rising interest rates slow the demand for both short-term and long-term funds. A decline in all rates and a return to a normal curve may occur as a result of the slowdown.财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。
财务风险外文原文
Political and Financial Risks and Their Mitigation Measures in Public Private Partnershipsby LIAO BOJING CHAPTER 4FINANCIAL RISKS AND THEIR MITIGATION MEASURES4.1 Interest Rate RiskIn construction project finance ventures, there is always the risk of fluctuations in interest rates. Credit is always granted with a variable rate, due to the long life of such PPP projects. In addition, unlike exchange rate risk, interest rate risk indiscriminately strikes both domestic and international projects as well as ventures with multi-currency cash flows. Sponsors and their advisors have to decide whether or not to cover against this risk, a decision that is not exactly identical throughout the life of the project (Gatti, 2008). The mitigation measures for interest rate risk mainly include:(1)Adopting an appropriate multicurrency portfolio, e.g., a dual-currency contract, which uses a foreign currency of lower rate interest, and a local currency for repayment of the principal. Various currencies have different interest rates. The private sector and its advisers must make the effects on making an ideal combination of a variety of foreign currency and cooperating with the banks so as to reduce interest rate risk. Dual-currency is to use a lower rate currency for interest accrual, and choose the local currency for repayment of the principal.(2)Balancing the floating rate and fixed-rate debt in the financing structure. When there is a lack of capital supplies in the international finance market, the interest rate will rise. Under this situation, the private sector should choose a fixed rate. When there is a surplus of capital supplies in the international finance market, the interest rate tends to go down. Therefore, a floating rate should be selected. The balanced proportion on the fixed rate and floating rate will reduce the risk and profit lost.(3)Seeking a reasonable interest rate that is guaranteed by the host government. The host government will provide a guaranteed interest rate to the private sector. During the project period,if the interest rate exceeds the required percentage, the private sector will be compensated. For example, for the north-to-south highway project in Malaysia, the project company, PLUS, received a guaranteed interest rate from the Malaysian government: if the growth of the interest rate exceeds 20%, the project company will obtain redressment of the margins from the compensation package.(4)Using interest rate derivatives(e.g., forward rate agreements, interest rate futures, swaps, options ) to insure against future interest rate fluctuations so as to reduce the interest rate risk.Forward Rate Agreements (FRA)With an FRA, the buyer pledges to pay the seller interest accrued on the principal at a pre-agreed rate, starting at a future date, and for certain period of time. The FRA buyer sets the future rate and is covered from interest rate risk. If in fact the future rate is higher than what was agreed on in thecontract, the seller of the forward rate agreement pays the difference between the two rates to the buyer. Conversely, it will be paid by the buyer if the future rate proves to be lower than the pre-set rate.Interest Rate FuturesA future is a forward agreement in which all contractual provisions are standardized. Due to this fact, futures differ from forward contracts in light of their lower risk for counterparties and greater market liquidity. In project finance ventures, interest rate futures can be used to curb the negative effect ofa rise in interest rates on a loan raised by the private sector.Interest Rate SwapIn their simplest form, interest rate swaps are a periodic exchange of fixed rate streams against floating rate streams (usually indexed to LIBOR) for a given time horizon. In an interest rate swap, one of the counterparty agrees to pay either a fixed or floating rate denominated in a particular currency to the other counterparty. In such a way, the financial cost can be well locked.Interest Rate Option (caps/floors/collars)Options are contracts that allow (but do not oblige) the buyer to purchase(call option) or sell (put option) a commodity or a financial asset at a fixed price (strike price) at a future date in exchange for payment of a premium. In project finance deals, interest rate options are used for protecting the private sector’s cash flows from interest rate risk.(5)Using bond financing in which the interest rates fixed to reduce the risk of future interest rate increase. Bonds can have fixed and floating rates of interest. In this regard, bond financing is often used in reducing interest cost and in mitigating the interest rate fluctuation risk. However, bond issuance is a long and expensive process compared to acquiring bank loans.(6)Using the supplier's credit to reduce the amount of debt and get the debt at a lower interest rate Interest rates of supplier's credit is generally lower than that in capital lending market under the same conditions, and interest rate differentials can be gained from the exporting country government subsidy.(7)Acquisition of loans and assistance from international financial institutions (e.g., Asian Development Bank and World Bank) to make the projects secure and less risky. These kinds of banks are multilateral development financial institutions. Their mission is to help developing member countries to reduce poverty and improve the quality of life of their citizens. Take Asia Development Bank (ADB) as an example. It aims to promote economic and social development in Asian and Pacific countries through loans and technical assistance. From this perspective, finance projects from these institutions can be secured and are less risky.(8)Predicting the changing trend of future interest rate and making the corresponding financing preparation. Predict the trend of the future interest rate through collecting multi information. For example, ininternational financial markets with a lackof capital supply, the interest rate will gradually increase so that fixing the interest rate is appropriate; whereas whenthere is an excess supply of capital in the markets, the interest rates tend to decline so the floating rates is better.4.2 Inflation RiskIn practice, the biggest problem arising from economic mismanagement is inflation, especially for a foreign firm with assets in a country. With high inflation, the value of the cash flows received from assets will fall as the country’s currency depreciates on the foreign exchange market. The likelihood of this occurring decreases the attractiveness of foreign investment in the country (Kapila1 and Hendrickson 2001). Inflation risk derives from the fact that most contracts between SPVs and their commercial counterparties are based on revision mechanisms for rates or installments based on the behavior ofa given price index. Both industrial and financial costs and revenues are impacted by inflation risk.The mitigation measures for inflation risk mainly include:(1)Increasing the proportion of hardcurrencies in the cash flow. In general, the best way for the private sector to mitigate inflation risk is by maximizing the proportion of cash flows in hard currencies to be channeled through off-shore mechanisms.(2)Indexing the price of the service or productfrom the project to the inflation rate. Prescribe the relevant items in concession agreements and combine the price of the product and service with the price index or inflation rate of the host country. Using the pricing adjustment formula, which consists ofinflation rate factors, as the method for checking the pricing in the future terms, will allow one to adjust pricing when the inflation rate’s movement exceeds a certain range, or accordingly raise the fees, or extend the permitted period in order to guarantee sufficient cash flow to pay off debts and to assure the investment profit.(3)Including a price adjustment clause inthe long term purchase contract. If the Inflation Index adjust the price of products, the Project Company could increase charging standards on their own based on CPI. However,the foundation of the adjustment must be established by strict accounting and be effective after the government’s approval.(4)Drawing up an inflation swap to transfer inflation risk through an exchange of cash flows. To cover against inflation risk, a swap contract is signed between two parties. In an inflation swap, the private sector pays a fixed rate on a notional principal amount, while the other party pays a floating rate linked to an inflation index, such as the Consumer Price Index (CPI). The party paying the floating rate pays the inflation adjusted rate multiplied by the notional principal amount. For example, one party may pay a fixed rate of 3% on a two year inflation swap, and in return receives the actual inflation.(5)Investing in Treasury Inflation Protected Securities to insure the purchasing power of the project company in the future and reduce the inflation influence.A treasury security is indexed to inflation in order to protect the private sectors from the negative effects of inflation. TIPS are considered an extremely low-risk investment since they are backed by the U.S. government andsince their par value rises with inflation, as measured by the Consumer Price Index, while their interest rate remains fixed. Interest on TIPS is paid semi-annually.(6)Choosing the favorable form of construction contract (e.g., Fixed-price Contract and Turn-key Contract) to transfer the increased cost due to inflation to contractors.Making a fixed price contract, turn-in-key contract and cost-plus contract with contractors, the risk of costoverruns caused by the increasing price of cement, steel and the labor can be transferred to the contractors.(7) Predicting the changing trend of future inflation and adjusting the price of product or service accordingly. The project company makes an inflation expectation during the period and confirms the price of the productsfor each annual operation, thus the risk can be avoided.(8) Enhancing the management of the receivable accounts to accelerate the recovery of the project funds. The receivable accounts are managed as the important aspect of financial administration, which influences the managementstate of the project company. Effective receivable accounts management brings favorable cash flow which determines the development or decline of the project.(9) Reducing the operating costs of the projectby strengthening the cost management. Cost management is also a significant part of financial management which can maintain and improve healthy financial statement of the project company.4.3 Currency Exchange RiskForeign exchange risk results from the mismatch between the revenue of the currency and payment obligations for taxes, operating expenses, debt service payments and dividend payments and profit repatriation (Wang et al.,2000). This often occurs in international projects where costs and revenues are computed in different currencies. However, a similar situation may arise in domesticprojects when the counterparty wants to bill the SPV in foreign currency (Gatti, 2008). Here is such an example in China. For investment in China's PPP projects, the foreign companies will invariably receive nearly all of their revenues in RMB. A significant portion of this revenue will need to be converted to other currencies, primarily US dollars, and remitted outside of China. The remittances are used to meet foreign currency obligations to equipment suppliers, to repay borrowings from foreign lenders and to make payments to the companies in respect of equity distributions and shareholder loans. The RMB is not freely convertible into USdollars; even if it is convertible,the exchange rate fluctuates all the time in the market or is subject to the approval of the State Administration for Exchange Control (SAEC). Also, there can be no assurance that the Chinese Government will continue to provide approvals.The mitigation measures for currency exchange risk mainly include:(1) Obtaining currency exchange risk sharing clause from host government. In the PPP agreement there usually exists a foreign exchange risk sharing clause, which means that if theexchange rate fluctuates within a range, the loss is borne by the private sector, but once the changes are beyond a certain value,the loss caused by the exchange rate fluctuations are borne by the host governmentor shared in proportion by both sides. Foreign exchange guarantee in PPP is not an international practice. Whether local government makes a guarantee highly depends on the degree of financial liberalization and complete.(2) Selecting appropriate currency to evade the currency exchange risk, e.g. foreign currency invoicing, loan currency invoicing, hard currency invoicing, and dual-currency agreement. A reasonable foreign currency structure would maintain the appropriate proportion between various currencies and optimize the multi-currency portfolio. The private sector may require the user to pay directly in the currency of the project sponsor country (foreign project sponsor) or adjust the fee structure in which a certain percentage of the loans are used for payment so as to reduce foreign exchange risk, or choose the strong currencies which show few exchange rate movements in the a long term such as US dollar and the euro and other strong currencies. Using a dual-currency or multi-currency agreement, namely you can pay by local currency or partially in other foreign currencies.(3) Enlarging financing proportion in local currency. The private sector needs to seek local lenders or structure their debt in local currency to mitigate risks. Because the revenue from projects can be used to repay the capital and interest, there is no foreign exchange problem and avoid exchange rate risk completely.(4) Using Exchange Rate Proviso Clause which can make a proper adjustment of repayment once the exchange rate exceeds the ratio between the repayment currency and hedge currency (e.g. gold proviso clause, hard currency hedge, and basket of currencies). If valuation in the contract is based on the local currency denominated, according to international practice and the "Guide to Contracting industrial projects in developing countries" developed by the United Nations, the clause on hedging should be provided in the contract terms in order to prevent any exchange rate risk. An Exchange Rate Proviso Clause is one measure that can make a proper adjustment of repayment based on the exchange rate between the repayment currency and the hedge currency, for instance, gold proviso clause, the hard currency hedge, and a basketof currencies. The latter can maintain the value of contracts in relation to the composite currency, like Special Drawing Right (SDR).(5) Using Leads and Lags to mitigate risks or improve profits. Leads will result when private sector making payments expect an increasing foreign-exchange rate, while lags arise when the exchange rate is expected to fall. Leads will result when the private sector making payments and expects an increasing foreign-exchange rate, while lags arise when the exchange rate is expected to fall. Leads and lags are used in an attempt to mitigate risks or improve profits.(6)Buying export credit insurance with export credit agencies against the currency exchange risk. Export credit insurance protects the foreign receivables against virtually all commercial and political risks that could result in non-payment of project company’s export invoices. This insurance especially is offered by national export credit agencies to help exporters to deal withthecurrency exchange risk.(7) Using Letter of Credit to substitute a portion of the security deposit, so the project company may take currency back in advance tomitigate foreign exchange rate risk. Letters of credit are often used in international transactions to ensurethat payment will be received. A letter from a bank can guarantee that a buyer's payment to a seller will be received on time and for the correct amount. In the event that the buyer is unable to make payment on the purchase, the bank will be required to cover the full or remaining amount of the purchase. By using a letter of credit to substitute a portion of the security deposit, the project company may take currency back inadvance to mitigate foreign exchange rate risk.(8) Using financial derivatives to prevent currency exchange rate risk, such as forward exchanges, swaps, foreign exchange futures/options, and currency swaps.Forward ExchangeA forward contract involves an exchange with a delayed settlement. Traders set down contract conditions (specifically the date ofsettlement and the price) upon signing the contract, and the exchange is actually settled at a future, pre-agreed date. A forward contract might pertain to a currency exchange rate (on maturity, the traders sell each other one form of currency for another on the basis of an exchange rate set when the contract is drawn up).Futures on Exchange RatesA future is a forward agreement in which all the contractual provisions are standardized. In futures markets, a clearing house serves to guarantee obligations resulting from futures exchanges. This organization requires traders to pay an initial margin as collateral and daily variation margins until the position closes. Due to this fact, futures differ from forward contracts in light of their lower risk for counterparties and greater market liquidity. Futures markets, in fact, offer contracts written on the most widely exchanged currencies on an international level (Gatti 2008).Options on Exchange RatesA currency option is a viable alternative to futures, swaps, and forwards because it represents a right to buy or sella currency at a price and accounts for the volatility or the swings in currency prices. However, options are quite expensive, because protection is bought against adverse movements in the financial price but gains are also allowed from a favorable movement in the price (Clark & Marois, 1996).Currency SwapsCurrency swaps represent an agreement between two entities where one entity promises payment in one currency and the other promisesto make payments in another currency. Basically, a foreign exchange swap indicates there is a swap of a spot buy or a sale of foreign exchange offset by a forward sale or a buy. Currency swaps are a method to swap the risk for one party while the other party assumes a certain degree of risk. However, this is probably not the best mitigation tool due tothe high expenses involved if one of the currencies is not a desired/maincurrency (Chandra and Chang, 2000).(9)Balancing lending and investing to control exchange rate risk.The Balance method is effectively used in international transactionsfor controlling currency exchange risk. Take one example of balancing lending and investing is that during the same period, the private sector makes a investment which involves a local currency with the same quantity and opposite trend in order to avoid foreign exchange risk. Other ways ofbalancing are such as Borrowing, Investing, Borrow-Spot-Invest (BSI), Lead-Spot-Invest (LSI), Forfeiting, etc.(10) Utilizing multi-currency options of a syndicated loan to arrange the financing monetary structure. From project finance practice, more than 3000 million US dollar in developing countries, or more than 100 million in developed countries, of debt financing must be resolved by syndicated loans. The project sponsor should fully consider the demand for different currencies at all stages of project implementation and make full use of multi-currency options, especially in a syndicated loan, to make reasonable arrangements for currencies structure in order to minimize the foreign exchange risk, which may cause cash flow uncertainty, such as maintaining the balance between borrowing currencies and charge currency.(11) Getting advice from international institutions regarding the project’s currency exchange risk and useful actions to minimize this risk.There are numerous institutions providing services for forecasting exchange rates. Besides, the project manager should establish his/her own group which focuses on observing exchange rate fluctuations that have occurred and analyzing its impact on project progress, while providing a prediction of the tendency of short-term and long-term exchange rate.In accordance with the above discussion, a comparison of different mitigation measures faced exchange rate risk can be concluded, as below in Table 4.1.4.4 Currency Convertibility RiskMany countries impose foreign exchange restrictions or controls to prevent currency speculation and to protect their reserves. These restrictions affect the availability and value of a currency. These controls are designed to limit a customer's ability to freely convert one currency into another. Permission to exchange currencies must be given by the central bank of that country before the transaction can take place.The mitigation measures for currency convertibility risk mainly include:(1) Obtaining the host government’s guarantees on convertibility. This applies to concessions where the convertibility of currency can be guaranteed. Obtaining guarantees from the government is always the most effective measure for mitigating the exchange rate and convertibility risks.(2) Adopting alternative forms of currencies (local and foreign currency) as repayment in contract to mitigate currency convertibility risk. Set dual-currency selective repayment in contracts to mitigate lower currency convertibility risk. Which means one portion of the payment can be made in local currency and the other payment can be in the foreign currency. This measure is significant for lower currency convertibility risk.(3) Increasing bond financing to reduce the amount of direct loans, thus reducing the project company’s currency risk. The private sector can reduce the amount of direct loans by issuing bonds that can be of fixed and floating rates of interest, thus avoiding the currency risk. In this regard, bond financing is often used in reducing interest rate risk and currency convertibility risk. However, bond issuance is a long and expensive process compared to acquiring bank loans.(4)Establishing a contingency credit facility to cover unanticipated expenses. The private sector can extract the provision of risk by a certain percentage from profits each year so as to meet unexpected financial losses.(5) Training the senior management team of the project company with the related financial knowledge. Special attention should be paid to exchange rate risk for international PPP projects. In particular, company leaders and decision-makers, management personnel, financial personnel should have an understanding about foreign exchange tendency and international economic dynamics associated with the projects. Contract negotiators’understanding of exchange rate risk should bestrengthened so as to have affective planning to avoid exchange rate risk.。
财务风险管理外文文献翻译译文
Financial Risk ManagementAlthough financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originatewith events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequentmarket reactions, occur very quickly. The economic climate and markets can be affected very quickly by changes in exchangerates, interest rates, and commodity prices.Counterparties can rapidly become problematic. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of risk management.What Is Risk?Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as aresult of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit. Financial market exposure may provide strategic or competitive benefits.Risk is the likelihood of losses resulting from events such as changes in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated. Put another way, risk is the probable variability of returns.Since it is not always possible or desirable to eliminate risk, understanding it is an important step in determining how to manage it.Identifying exposuresand risks forms the basis for an appropriatefinancial risk management strategy.How Does Financial Risk?Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as aresult of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stakeholders, competitors, foreign governments, or weather. When financial prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget, price goods and services, and allocate capital.There are three main sources of financial risk:1.Financial risks arising from an organization e'xpsosure to changes in market prices, such as interest rates, exchange rates, and commodity prices.2.Financial risks arising from the actions of, and transactions with, other organizations such as vendors, customers, and counterparties in derivatives transactions3.Financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systemsWhat Is Financial Risk Management?Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessingthe financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitatesmaking organizational decisions about risks that are acceptable versus those that are not.The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies and products. It is important to understand how these products and strategies work to reduce risk within the context of the organization r'isks tolerance and objectives.Strategies for risk management often involve derivatives. Derivatives are traded widely among financial institutions and on organized exchanges. The value of derivatives contracts, such as futures, forwards, options, and swaps, is derived from the price of the underlying asset.Derivatives trade on interest rates, exchange rates, commodities, equity and fixed income securities, credit, and even weather.The products and strategies used by market participants to manage financial risk are the same ones used by speculators to increase leverage and risk. Although it can be argued that widespread use of derivatives increases risk, the existence of derivatives enables those who wish to reduce risk to pass it along to those who seek risk and its associated opportunities.The ability to estimate the likelihood of a financial loss is highly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change.Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows: 1、Identify and prioritize key financial risks.2、Determine an appropriate level of risk tolerance.3、Implement risk management strategy in accordance with policy.4、Measure, report, monitor, and refine as needed.DiversificationFor many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modernportfolio theory considers not only an asset 'ri s kiness, but alsoits contribution to the overall riskiness of the portfolio to which it is added. Organizations may have an opportunity to reduce risk as a result of risk diversification.In portfolio management terms, the addition of individual components to a portfolio provides opportunities fordiversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of the exposures of an organization as a portfolio and consider the impact of changes or additions on the potential risk of the total.Diversification is an important tool in managing financial risks.Diversification among counterparties may reduce the risk that unexpected events adversely impact the organization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails.Diversification of customers, suppliers, and financing sources reduces the possibility that an organization will have its business adversely affected by changes outside management'scontrol. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outcomes.Risk Management ProcessThe process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets.Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, legal, tax, commodity, and corporate finance.The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing the financial risks facing an organization and understanding their relevance. It may be necessary to examine the organization and its products, management, customers, suppliers, competitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk.Once a clear understanding of the risks emerges,appropriate strategies can be implemented in conjunction with risk management policy. For example, it might be possible to change where and how business is done, thereby reducing the organization 'exsposure and risk. Alternatively, existing exposures may be managed with derivatives. Another strategy for managing risk is to accept all risks and the possibility of losses.There are three broad alternatives for managing risk:1.Do nothing and actively, or passively by default, accept all risks.2.Hedge a portion of exposures by determining which exposures can and should be hedged.3.Hedge all exposures possible.Measurement and reporting of risks provides decision makers with information to execute decisions and monitor outcomes, both before and after strategies are taken to mitigate them. Since the risk managementprocess is ongoing, reporting and feedback can be used to refine the system by modifying or improving strategies.An active decision-making process is an important component of risk management. Decisions about potential loss and risk reduction provide a forum for discussion of important issues and the varying perspectives of stakeholders.Factors that Impact Financial Rates and PricesFinancial rates and prices are affected by a number of factors. It is essential to understand the factors that impact markets because those factors, in turn, impact the potential risk of an organization.Factors that Affect Interest RatesInterest rates are a key component in many market prices and an important economic barometer. They are comprised of the real rate plus a component for expected inflation, since inflation reduces the purchasing power of a lender 'a s sets.The greater the term to maturity, the greater the uncertainty. Interest rates are also reflective of supply and demand for funds and credit risk.Interest rates are particularly important to companies and governments because they are the key ingredient in the cost of capital. Most companies and governments require debt financing for expansion and capital projects. When interest rates increase, the impact can be significant on borrowers. Interest rates also affect prices in other financial markets, so their impact is far-reaching.Other components to the interest rate may include a risk premium to reflect the creditworthiness of a borrower. For example, the threat of political or sovereign risk can cause interest rates to rise, sometimes substantially, as investors demand additional compensation for the increased risk of default.Factors that influence the level of market interest rates include: 1、Expected levels of inflation 2、General economic conditions 3、Monetary policy and the stance of the central bank 4、Foreign exchange market activity 5、Foreign investor demand for debt securities 6、Levels of sovereign debt outstanding 7、Financial and political stabilityYield CurveThe yield curve is a graphical representation of yields for a range of terms to maturity. For example, a yield curve might illustrate yields for maturity from one day (overnight) to 30-yearterms. Typically, the rates are zero coupon government rates.Since current interest rates reflect expectations, the yieldcurve provides useful information about the market 'esxpectations offuture interest rates.Implied interest rates for forward-starting terms can be calculatedusing theinformation in the yield curve. For example, using rates for one-and two-year maturities, the expected one-year interestrate' s time can beginning in one year be determined.The shape of the yield curve is widely analyzed and monitored by market participants. As a gauge of expectations, it is oftenconsidered to be a predictor of future economic activity and mayprovide signals of a pending change in economic fundamentals.The yield curve normally slopes upward with a positive slope, as lenders/investors demand higher rates from borrowers for longerlending terms.Since the chance of a borrower default increases with term tomaturity, lenders demand to be compensated accordingly.Interest rates that make up the yield curve are also affected bythe expected rate of inflation. Investors demand at least theexpected rate of inflation from borrowers, in addition to lendingand risk components. If investors expect future inflation to behigher, they will demand greater premiums for longer terms tocompensate for this uncertainty. As a result, the longer the term,the higher the interest rate (all else being equal), resulting in an upward-sloping yield curve.Occasionally, the demand for short-term funds increasessubstantially, and short-term interest rates may rise above thelevel of longer term interest rates.This results in an inversion of the yield curve and a downward slopeto its appearance.The high cost of short-term funds detracts fromgains that would otherwise be obtained through investment andexpansion and make the economy vulnerable to slowdown or recession. Eventually, rising interest rates slow the demand for both short-term and long-term funds. A decline in all rates and a return to anormal curve may occur as a result of the slowdown.财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。
财务风险【外文翻译】
外文翻译原文Financial RiskMaterialSource:EssentialofFinancialRiskManagement Author:KarenA.H o r c h e r : Althoughfinancialriskhasincreasedsignificantlyinrecentyears,riskandriskmanagementarenotcontemporary issues.Theresult ofincreasingly global marketsisthatriskmayoriginatewitheventsthousands of miles away that have nothing rmationisavailableinstantaneously,whichmeansthatchange,andsubsequ entmarketreactions,occurveryquickly.Theeconomicclimateandmarketscan beaffected very quickly by changes inexchangerates,interestrates,andcommodityprices.Asaresult,it is importanttoensurefinancial risksareidentifiedandmanagedappropriately. Preparationis a keycomponentoffinancial riskmanagement.Riskprovides thebasis for opportunity. The terms risk and exposure havesubtle differences in their meaning. Risk refers to the probability of loss, whileexposure is the possibility of loss, although they are often used interchangeably.Riskarisesasaresultofexposure.Exposure to financial markets affects most organizations, either directly orindirectly.Whenanorganizationhasfinancialmarketexposure,thereisa possibilityof l oss bu t a l so a n opp ortu n i ty for g a in orprofit.R i sk i s the l ik el i ho od o f l osse s re su l ti ng from e v ents su c h a s cha ng e s in m a rketprices.Eventswitha lowprobability ofoccurring,butthatmay resultina highloss,areparticularly troublesomebecausetheyareoftennotanticipated.Since it is not always possible or desirable to eliminate financial risk,understandingitis an important step in determining how to manage it.Identifyingexposuresandrisksformsthebasis for an appropriate financial risk managementstrategy.Financial risk arises through countless transactions of a financial nature,including sales and purchases, investments and loans, and various other businessactivities,Whenpriceschangedramatically,itcanincreasecosts,reducerevenues,orotherwise adversely impact the profitability of an organization. Financialfluctuationsmay make itmoredifficulttoplanandbudgetprice goodsandservices,andallocatecapital.Therearethreemainsourcesoffinancialrisk:first,financialrisks arisingfrom an organizati on’s exposuretochanges in marketprices,such as interestrates,exchange rates, and commodity prices, second, financial risk arising from theactions of , and transaction with, other organizations such as vendors,customers,andcounterpartiesinderivativestransactions,third,financialrisksresultingfrominter nalactions or failures of the organization, particularly people, processes, andsystems.Financialriskmanagementis aprocess to deal with theuncertaintiesresultingfrom financial markets. It involves assessing the financial risks facing anorganization and developing management strategies consistent with internalpriorities and policies. Addressing financial risks proactively may provide anorganization with a competitive advantage. It also ensures that management,operational staff, stakeholder, and the board of directorsare in agreementon keyissuesofrisk.Managing financial risk necessitates making organizational decisions aboutrisksthatareacceptable versus thosethatarenot.Thepassive strategy oftakingnoactionistheacceptanceofallrisksbydefault.Organizationsmanagefinancialriskusingavarietyofstrategies.Itisimportanttounderstandhowthesestrategiesworktoreduceriskwi thinthecontextof theorganiza tion’s risktoleranceandobjectives.The ability to estimate the likelihood ofa financial loss is highly desirable.However, standard theories of probability often fail in the analysis of financialmarkets.Risks usually do not exist in isolation, and the interactions of severalexposures may have to be considered in developing an understanding of howfinancialriskarises.Sometimes,theseinteractions are difficult to forecast, sincetheyultimately dependonhumanbehavior.Theprocessoffinancialriskmanagementis anongoingone.Strategiesneedtobeimplementedand refinedas the marketand requirements change. R efinementsmay reflect changing expectations about market rates, changes to the businessenvironment,orchanginginternationalpoliticalconditions,forexample.Ingeneral,theprocessca nbe summarizedasfollows: first,identify andprioritizekey financialrisks ,second,determinean appropriatelevel ofrisk tolerance, third,implementriskmanagementstrategyinaccordance with policy, last, measure, report,monitor,andrefineasneeded.Major market risks arise out of changes to financial market prices such asexchangerates,interestrates,andcommodityprices.Majormarketrisksareusuallythemostobvioustypeoffinancialriskthatanorganizationfaces.Majormar ketrisksincludeforeignexchangerisk,interestraterisk,commodity price risk, equity pricerisk. Other important related financial risks include credit risk, operational risk,liquidityrisk,systemicrisk.T he intera ctions of sev era l ri sk s ca n a l ter or m a g n i fy the potentia l i m pa ct to anorganization.Forexample,an organizationmayhavebothcommoditypriceriskandforeign exchange risk, If both markets become adversely, the organization maysuffersignificantlossesasaresult.Therearetwocomponentstoassessingfinancialrisk,Thefirstcomponentisanunderstandingofpotentiallossas a result ofa particular rate orprice change,Thesecondcomponentisanestimateofheprobability ofsuchan eventoccurring.Interestrateriskarisesfromseveralsources,includingchangesinthe levelofinterest rates(absolute interest rate risk), changes in the shape of the yieldcurve(yield curve risk), mismatches between and the risk management strategiesundertaken(basisrisk).Intere st ra te ri sk a ffe c ts m a ny org a ni za ti ons, both borrow e r s a nd inv e stors, anditparticularlyaffectscapital-intensiveindustriesandsectors.C ha ng e s a ffe ct borrow ers throu g h the c o st of fu nd s, F or e x a m pl e, a c orporateborrowerthatutilizesfloatinginterestratedebtisexposedtorisinginterestratesthatcouldincrease thecompany’s costoffunds,A portfolio offixed income securities has exposure tointerestrates through bothchanges inyieldandgainsorlosses ona ssets held.Absoluteinterestraterisk resultsfromthepossibilityofadirectional, orup ordown,changeininterestrates.Mostorganizationsmonitorabsoluteinterestrateriskintheirriskassessment s,duetobothitsvisibility and its potential for affectingprofita bility.From aborrower’s p erspective,risinginterestrates mightresult inhigherprojectcostsandchangestofinancingorstrategicplans.Fromaninvestororlenderperspective,a decline in interest rates results in lower interest income given thesameinvestment,oralternatively,inadequatereturnoninvestmentsheld.Themostcommonmethodofhedgingabsoluteinterestrateriskis tomatch theduration of assets and liabilities, or replace floating interest rate borrowing orinvestmentswithfixed interest rate debtor investments. Another alternative is tohedgetheinterestrateriskwithtoolssuchasforwardrate agreements,swaps andintere st ra te ca ps, fl oors, a nd c olla r s.Yield curve risk results from changes in the relationship between short-termandlong-terminterestrates. In a normal interest rate environment,the yield curvehasanupward-sloping shape to it. Longer-term interest rates are higher thanshorter-terminterestratesbecause of higher risk to the lender. The steepening offlatteningoftheyieldcurvechangestheinterestratedifferentialbetween maturities,whichcanimpactborrowingandinvestmentdecisionsandthereforeprofitability.Inaninvertedyieldcurveenvironment,demandforshort-termfundspushesshort-termrates above long-termrates.The yieldcurve may appear inverted or flatacrossmostmaturities,oralternativelyonlyincertainmaturitysegments.Insuchanenvironment, ratesoflongertermstomaturitymaybeimpactedlessthanshortertermstomaturity.Whenthereisamismatchbetweenanorg anization’s a ssetsand liabilities,yieldcurverisk should beassessedasacomponentoftheorganizatio n’s intere st ra te ri sk.Creditriskisoneofthemostprevalentrisksoffinanceandbusiness,Ingeneral,creditriskisaconcernwhe nanorganizationisowedmoney ormustrely onanotherorg a niza tion to m a k e a pa y m ent to i t or o n i ts be ha l f. T he fa i lu re of a c ou nte rpa rty i sle s s of a n i s su e w he n the o rg a ni za ti on i s not ow ed m one y on a n et ba si s, a l thou g h i tdependstoa certaindegreeonthelegalenvironmentandwhetherfundsareowedonanetoraggregate basis on individual contracts.The deteriorationofcreditquality,suchasthatofa securitiesissuer,isalsoa sourceofriskthroughthereduced marketvalueofsecuritiesthatanorganizationmightown.C re dit ri sk increa se s a s ti m e to ex piry, ti m e to settl e m e nt, or ti m e to m a tu rityincrease,Themoveby international regulatorstoshorten settlementtime forcertaintypesofsecuritiestradesisaneffortto reduce systemic risk, whichinturnisbasedontheriskofindividualmarketparticipants.Italsoincreasesinan environmentofrisinginterestratesorpooreconomicfundamentals.Organization are exposed to credit risk through all business and financialtransactionsthat depend on the payment or fulfillment of obligations of others,Creditrisk that arises from exposure to a counterparty, such as in a derivativestransaction,isoftenknownascounterpartyrisk.Foreignexchange risk arises through transaction, translation, and economicexposures.It mayalsoarise from commodity-basedtransactionswhere commoditypricesaredeterminedandtradedinanothercurrency.Itincludestransactionrisk,translationrisk andstrategic risk. Transaction riskimpactsan organizatio n’s profitability throughtheincome statement.Itarises from theordinary transactionsofan organization, including purchases from suppliers and vendors, contractualpaymentsinother currencies, royalties of license fees, and sales to customers anizationsthat buyorsell productsandservicesdenominatedina foreigncurrency typically havetransactionexposure.M a na g e m e nt of tra nsa ction ri sk ca n be a n i m porta nt de te rm ina ntofcompetitivenessinaglobaleconomy.Therearefewcorporationswhosebusinessisnotaffected,eitherdirectlyorindirectly,by transactionrisk.Translationrisktraditionallyreferredto fluctuationsresult fromtheaccountingtranslationoffinancialstatement,particularly assetsand liabilities on the balancesheet. Translation exposure results wherever assets, liabilities, or profits aretranslated fromthe operatingcurrency intoa reportingcurrency.From another perspective, translation exposure affects an organization byaffectingthevalue offoreigncurrency balancesheetitems suchasaccountspayableand receivable, foreign currency cash and deposits, and foreign currency debt.Longer-term assetsand liabilities, such as thoseassociatedwith foreign operations,arelikely tobeparticularly impacted.The location and activities of major competitors may be an importantdeterminantof foreignexchangeexposure.Strategicoreconomicexposureaffectsanorganization’s c ompetitive positionas a result ofchanges in exchange rates. Economicexposure,suchasdecliningsalesfrominternationalcustomers,do notshow u p o n the ba l a n c e shee t, thou g h their i m pa ct a ppea rs i n i ncom e s ta tements.For example, a firm whose domestic currency has appreciated dramaticallymayfinditsproductsaretooexpensiveininternational marketsdespiteitseffortstoreducecostofproductionandminimizeprices.Thepricesofgoodexportedbyth efirm’s c ompetitors,whoarecoincidentallylocatedina weak-currency environment,becomecheaperbycomparisonwithoutanyactionontheirpart.译文财务风险资料来源:财务风险管理的核心作者:凯伦 A 哈克尽管在近几年,财务风险问题表现得越来越显著,但风险与风险管理并不只是当前的话题。
Financial-Risk-Management财务风险管理大学毕业论文外文文献翻译及原文
毕业设计(论文)外文文献翻译文献、资料中文题目:财务风险管理文献、资料英文题目:Financial Risk Management 文献、资料来源:文献、资料发表(出版)日期:院(部):专业:班级:姓名:学号:指导教师:翻译日期: 2017.02.14财务管理类本科毕业论文外文翻译译文:[美]卡伦·A·霍契.《什么是财务风险管理?》.《财务风险管理要点》.约翰.威立国际出版公司,2005:P1-22.财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。
全球市场越来越多的问题是,风险可能来自几千英里以外的与这些事件无关的国外市场。
意味着需要的信息可以在瞬间得到,而其后的市场反应,很快就发生了。
经济气候和市场可能会快速影响外汇汇率变化、利率及大宗商品价格,交易对手会迅速成为一个问题。
因此,重要的一点是要确保金融风险是可以被识别并且管理得当的。
准备是风险管理工作的一个关键组成部分。
什么是风险?风险给机会提供了基础。
风险和暴露的条款让它们在含义上有了细微的差别。
风险是指有损失的可能性,而暴露是可能的损失,尽管他们通常可以互换。
风险起因是由于暴露。
金融市场的暴露影响大多数机构,包括直接或间接的影响。
当一个组织的金融市场暴露,有损失的可能性,但也是一个获利或利润的机会。
金融市场的暴露可以提供战略性或竞争性的利益。
风险损失的可能性事件来自如市场价格的变化。
事件发生的可能性很小,但这可能导致损失率很高,特别麻烦,因为他们往往比预想的要严重得多。
换句话说,可能就是变异的风险回报。
由于它并不总是可能的,或者能满意地把风险消除,在决定如何管理它中了解它是很重要的一步。
识别暴露和风险形式的基础需要相应的财务风险管理策略。
财务风险是如何产生的呢?无数金融性质的交易包括销售和采购,投资和贷款,以及其他各种业务活动,产生了财务风险。
它可以出现在合法的交易中,新项目中,兼并和收购中,债务融资中,能源部分的成本中,或通过管理的活动,利益相关者,竞争者,外国政府,或天气出现。
财务风险【外文翻译】
外文翻译原文Financial RiskMaterial Source:Essential of Financial Risk Management Author:Karen A.H o r c h e r:Although financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originate with events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequent market reactions, occur very quickly.The economic climate and markets can be affected very quickly by changes in exchange rates, interest rates, and commodity prices. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of financial risk management.Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as a result of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit.Risk is the likelihood of losses resulting from events such as changes in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated.Since it is not always possible or desirable to eliminate financial risk, understanding it is an important step in determining how to manage it. Identifying exposures and risks forms the basis for an appropriate financial risk management strategy.Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities,When prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget price goods and services, and allocate capital.There are three main sources of financial risk :first, financial risks arising from an organization’s exposure to changes in market prices, such as interest rates, exchange rates, and commodity prices, second, financial risk arising from the actions of , and transaction with, other organizations such as vendors, customers, and counterparties in derivatives transactions, third, financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systems.Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholder, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitates making organizational decisions about risks that are acceptable versus those that are not. The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies. It is important to understand how these strategies work to reduce risk within the context of the organization’s risk tolerance and objectives.The ability to estimate the likelihood of a financial loss is highly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows : first, identify and prioritize key financialrisks ,second, determine an appropriate level of risk tolerance, third, implement risk management strategy in accordance with policy, last, measure, report, monitor, and refine as needed.Major market risks arise out of changes to financial market prices such as exchange rates, interest rates, and commodity prices. Major market risks are usually the most obvious type of financial risk that an organization faces. Major market risks include foreign exchange risk, interest rate risk, commodity price risk, equity price risk. Other important related financial risks include credit risk, operational risk, liquidity risk, systemic risk.The interactions of several risks can alter or magnify the potential impact to an organization. For example, an organization may have both commodity price risk and foreign exchange risk, If both markets become adversely, the organization may suffer significant losses as a result.There are two components to assessing financial risk, The first component is an understanding of potential loss as a result of a particular rate or price change, The second component is an estimate of he probability of such an event occurring.Interest rate risk arises from several sources, including changes in the level of interest rates(absolute interest rate risk), changes in the shape of the yield curve(yield curve risk), mismatches between and the risk management strategies undertaken(basis risk).Interest rate risk affects many organizations, both borrowers and investors, and it particularly affects capital-intensive industries and sectors.Changes affect borrowers through the cost of funds, For example, a corporate borrower that utilizes floating interest rate debt is exposed to rising interest rates that could increase the company’s cost of funds, A portfolio of fixed income securities has exposure to interest rates through both changes in yield and gains or losses on assets held.Absolute interest rate risk results from the possibility of a directional, or up or down, change in interest rates. Most organizations monitor absolute interest rate risk in their risk assessments, due to both its visibility and its potential for affecting profitability.From a borrower’s perspective, rising interest rates might result in higher project costs and changes to financing or strategic plans. From an investor or lender perspective, a decline in interest rates results in lower interest income given the same investment, or alternatively, inadequate return on investments held.The most common method of hedging absolute interest rate risk is to match the duration of assets and liabilities, or replace floating interest rate borrowing or investments with fixed interest rate debt or investments. Another alternative is to hedge the interest rate risk with tools such as forward rate agreements, swaps and interest rate caps, floors, and collars.Yield curve risk results from changes in the relationship between short-term and long-term interest rates. In a normal interest rate environment, the yield curve has an upward-sloping shape to it. Longer-term interest rates are higher than shorter-term interest rates because of higher risk to the lender. The steepening of flattening of the yield curve changes the interest rate differential between maturities, which can impact borrowing and investment decisions and therefore profitability.In an inverted yield curve environment, demand for short-term funds pushes short-term rates above long-term rates. The yield curve may appear inverted or flat across most maturities, or alternatively only in certain maturity segments. In such an environment, rates of longer terms to maturity may be impacted less than shorter terms to maturity. When there is a mismatch between an organization’s assets and liabilities, yield curve risk should be assessed as a component of the organization’s interest rate risk.Credit risk is one of the most prevalent risks of finance and business, In general, credit risk is a concern when an organization is owed money or must rely on another organization to make a payment to it or on its behalf. The failure of a counterparty is less of an issue when the organization is not owed money on a net basis, although it depends to a certain degree on the legal environment and whether funds are owed on a net or aggregate basis on individual contracts. The deterioration of credit quality, such as that of a securities issuer, is also a source of risk through the reduced market value of securities that an organization might own.Credit risk increases as time to expiry, time to settlement, or time to maturity increase, The move by international regulators to shorten settlement time for certain types of securities trades is an effort to reduce systemic risk, which in turn is based on the risk of individual market participants. It also increases in an environment of rising interest rates or poor economic fundamentals.Organization are exposed to credit risk through all business and financial transactions that depend on the payment or fulfillment of obligations of others, Credit risk that arises from exposure to a counterparty, such as in a derivatives transaction, is often known as counterparty risk.Foreign exchange risk arises through transaction, translation, and economic exposures. It may also arise from commodity-based transactions where commodity prices are determined and traded in another currency. It includes transaction risk, translation risk and strategic risk. Transaction risk impacts an organization’s profitability through the income statement. It arises from the ordinary transactions of an organization, including purchases from suppliers and vendors, contractual payments in other currencies, royalties of license fees, and sales to customers in currencies other than the domestic one. Organizations that buy or sell products and services denominated in a foreign currency typically have transaction exposure.Management of transaction risk can be an important determinant of competitiveness in a global economy. There are few corporations whose business is not affected, either directly or indirectly, by transaction risk.Translation risk traditionally referred to fluctuations result from the accounting translation of financial statement, particularly assets and liabilities on the balance sheet. Translation exposure results wherever assets, liabilities, or profits are translated from the operating currency into a reporting currency.From another perspective, translation exposure affects an organization by affecting the value of foreign currency balance sheet items such as accounts payable and receivable, foreign currency cash and deposits, and foreign currency debt. Longer-term assets and liabilities, such as those associated with foreign operations, are likely to be particularly impacted.The location and activities of major competitors may be an important determinant of foreign exchange exposure. Strategic or economic exposure affects an organization’s competitive position as a result of changes in exchange rates. Economic exposure, such as declining sales from international customers, do not show up on the balance sheet, though their impact appears in income statements.For example, a firm whose domestic currency has appreciated dramatically may find its products are too expensive in international markets despite its efforts to reduce cost of production and minimize prices. The prices of good exported by the firm’s competitors, who are coincidentally located in a weak-currency environment, become cheaper by comparison without any action on their part.译文财务风险资料来源:财务风险管理的核心作者:凯伦 A 哈克尽管在近几年,财务风险问题表现得越来越显著,但风险与风险管理并不只是当前的话题。
企业财务风险管理 外文文献翻译
文献出处:Błach J. Financial Risk Identification Based on the Balance Sheet Information[J]. Managing and Modelling of Financial Risks, 2016,1: 10-19.第一部分为译文,第二部分为原文。
默认格式:中文五号宋体,英文五号Times New Roma,行间距1.5倍。
基于资产负债表信息的财务风险识别摘要:现代经济风险暴露不断增加,所有企业都要承担不同类型的风险。
本文研究财务风险的定义,组成部分,因素和后果,以及通过资产负债表提供的信息的使用来识别和分析财务风险。
此外,还介绍了这种财务风险评估方法的优缺点,以100个最大波兰公司10年(2000-2009年)的汇总数据为例,测试了根据资产负债表信息确定财务风险的潜力。
关键词:财务风险,财务分析,风险评估,资产负债表。
1. 引言现代社会往往被描述为“风险社会”,这意味着社会的财富生产伴随着社会风险生产。
因此,在这种环境下经营的企业,被迫采取不同类型的风险识别,以发展自己,提高效率。
考虑到不同类型的标准,有各种各样的企业风险进行分析和分类。
企业风险最重要的类型之一是财务风险。
2.财务风险定义及其组成部分文献中没有统一的财务风险定义。
但问题始于风险的一般定义。
在理论上,提出了风险定义的两个概念。
第一个-负面概念将风险描述为潜在损失的威胁。
第二个-中立概念表明,风险不仅是威胁,也是机会,所以风险意味着获得不同于预期的结果的可能性。
因此,风险的定义主要取决于风险的方法,并且可能导致管理者采取的不同行动。
如果采取负面做法,管理人员的主要目标是尽可能减少潜在的损失,并设法避免危险行为,以稳定公司的情况。
在第二种情况下,经理们不仅要尽量减少损失,还要尽量利用承担风险,改善公司状况。
因此,可以从中性或消极的角度分析任何类型的风险的金融风险。
企业并购财务风险控制外文文献翻译译文3100字
企业并购财务风险控制外文文献翻译译文3100字Financial risk is one of the major XXX It refers to the risk of financial loss caused by the XXX in the value of assets。
The main types of financial risk in mergers and ns include credit risk。
interest rate risk。
exchange rate risk。
and liquidity risk。
Credit risk refers to the risk of default by the borrower。
while interest rate risk refers to the risk of XXX。
Exchange rate risk is the risk of XXX。
and liquidity risk refers to the risk of XXX.XXX。
it is XXX before the n。
including analyzing the financial status of the target company。
XXX。
and assessing the potential impact of interest rate and exchange rate XXX。
it is XXX a sound financial management system and XXX.1.2 Asset riskAsset risk refers to the risk of losses caused by the decline in the value of assets or the XXX the expected value of assets。
财务风险管理中英文对照外文翻译文献
财务风险管理中英文对照外文翻译文献译文:[美]卡伦〃A〃霍契.《什么是财务风险管理?》.《财务风险管理要点》.约翰.威立国际出版公司,2005:P1-22.财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。
全球市场越来越多的问题是,风险可能来自几千英里以外的与这些事件无关的国外市场。
意味着需要的信息可以在瞬间得到,而其后的市场反应,很快就发生了。
经济气候和市场可能会快速影响外汇汇率变化、利率及大宗商品价格,交易对手会迅速成为一个问题。
因此,重要的一点是要确保金融风险是可以被识别并且管理得当的。
准备是风险管理工作的一个关键组成部分。
什么是风险?风险给机会提供了基础。
风险和暴露的条款让它们在含义上有了细微的差别。
风险是指有损失的可能性,而暴露是可能的损失,尽管他们通常可以互换。
风险起因是由于暴露。
金融市场的暴露影响大多数机构,包括直接或间接的影响。
当一个组织的金融市场暴露,有损失的可能性,但也是一个获利或利润的机会。
金融市场的暴露可以提供战略性或竞争性的利益。
风险损失的可能性事件来自如市场价格的变化。
事件发生的可能性很小,但这可能导致损失率很高,特别麻烦,因为他们往往比预想的要严重得多。
换句话说,可能就是变异的风险回报。
由于它并不总是可能的,或者能满意地把风险消除,在决定如何管理它中了解它是很重要的一步。
识别暴露和风险形式的基础需要相应的财务风险管理策略。
财务风险是如何产生的呢?无数金融性质的交易包括销售和采购,投资和贷款,以及其他各种业务活动,产生了财务风险。
它可以出现在合法的交易中,新项目中,兼并和收购中,债务融资中,能源部分的成本中,或通过管理的活动,利益相关者,竞争者,外国政府,或天气出现。
当金融的价格变化很大,它可以增加成本,降低财政收入,或影响其他有不利影响的盈利能力的组织。
金融波动可能使人们难以规划和预算商品和服务的价格,并分配资金。
有三种金融风险的主要来源:1、金融风险起因于组织所暴露出来的市场价格的变化,如利率、汇率、和大宗商品价格。
中小企业财务风险管理外文文献翻译2017
外文文献翻译原文及译文文献出处: Sharifi, Omid. International Journal of Information, Business and Management 6.2 (May 2017): 82-94.原文Financial R isk M ana gement for Small and M edium SizedEnter pr ises(SM ES)Omid SharifiMBA, Depa rtment of Commerce and Business Ma nagement,Ka ka tiya University, House No. 2-1-664, Sa ra wa thi nega r,1.ABSTR AC Tmedium sized Enterprises (SME) do also face business risks, Similar to large companies, Small and Mwhich in worst case can cause financial distress and lead to bankruptcy. However, although SME are a major part of the India and also international - economy, research mainly focused on risk management in large corporations. Therefore the aim of this paper is to suggest a possible mean for the risk identification, analysis and monitoring, which can be applied by SME to manage their internal financial risks. For this purpose the financial analysis, which has been used in research to identify indicators for firm bankruptcy, was chosen.The data required for the study was collected from Annual report of the Intec Capital Limited. For the period of five years, from 2008 to 2012.the findings showed the data and the overview can be used in SME risk management.Keywor ds: Annual report, Small and Medium sized Enterprises, Financial Risks, Risk Management.2.INTR UDUC TIONSmall and medium sized enterprises (SME) differ from large corporations among other aspects first of all in their size. Their importance in the economy however is large . SME sector of India is considered as the backbone of economy contributing to 45% of the industrial output, 40% of India’s exports, employing 60 million people, create 1.3 million jobs every year and produce more than 8000 quality products for the Indian and international markets. With approximately 30 million SMEs in India, 12 million people expected to join the workforce in next 3 years and the sector growing at a rate of 8% per year, Government of India is taking different measures so as to increase their competitiveness in the international market. There are several factors that have contributed towards the growth of Indian SMEs.Few of these include; funding of SMEs by local and foreign investors, the new technology that is used in the market is assisting SMEsadd considerable value to their business, various trade directories and trade portals help facilitate trade between buyer and supplier and thus reducing the barrier to trade With this huge potential, backed up by strong government support; Indian SMEs continue to post their growth stories. Despite of this strong growth, there is huge potential amongst Indian SMEs that still remains untapped. Once this untapped potential becomes the source for growth of these units, there would be no stopping to India posting a GDP higher than that of US and China and becoming the world’s economic powerhouse.3. R ESEAR C H QUESTIONRisk and economic activity are inseparable. Every business decision and entrepreneurial act is connected with risk. This applies also to business of small and medium sized enterprises as they are also facing several and often the same risks as bigger companies. In a real businessenvironment with market imperfections they need to manage those risks in order to secure their business continuity and add additional value by avoiding or reducing transaction costs and cost of financial distress or bankruptcy. However, risk management is a challenge for most SME. In contrast to larger companies they often lack the necessary resources, with regard to manpower, databases and specialty of knowledge to perform a standardized and structured risk management. The result is that many smaller companies do not perform sufficient analysis to identify their risk. This aspect is exacerbated due to a lack in literature about methods for risk management in SME, as stated by Henschel: The two challenging aspects with regard to risk management in SME are therefore:1.SME differ from large corporations in many characteristics2.The existing research lacks a focus on risk management in SMEThe following research question will be central to this work:1.h ow can SME manage their internal financial risk?2.W hich aspects, based on their characteristics, have to be taken into account for this?3.W hich mean fulfils the requirements and can be applied to SME?4. L ITER ATUR E R EVIEWIn contrast to larger corporations, in SME one of the owners is often part of the management team. His intuition and experience are important for managing the company. Therefore, in small companies, the (owner-)manager is often responsible for many different tasks and important decisions. Most SME do not have the necessary resources to employ specialists on every position in the company. They focus on their core business and have generalists for the administrative functions. Behr and Guttler find that SME on average have equity ratios lower than 20%. The different characteristics of management, position on procurement and capital markets and the legal framework need to be taken into account when applying management instruments like risk management. Therefore the risk management techniques of larger corporations cannot easily be applied to SME. In practice it can therefore be observed that although SME are not facing less risks and uncertainties than large companies, their risk management differs from the practices in larger companies. The latter have the resources to employ a risk manager and a professional, structured and standardized risk management system. In contrast to that, risk management in SME differs in the degree of implementation and the techniques applied. Jonen & Simgen-Weber With regard to firm size and the use of risk management. Beyer, Hachmeister & Lampenius observe in a study from 2010 that increasing firm size among SME enhances the use of risk management. This observation matches with the opinion of nearly 10% of SME, which are of the opinion, that risk management is only reasonable in larger corporations. Beyer, Hachmeister & Lampenius find that most of the surveyed SME identify risks with help of statistics,checklists, creativity and scenario analyses. reveals similar findings and state that most companies rely on key figure systems for identifying and evaluating the urgency of business risks. That small firms face higher costs of hedging than larger corporations. This fact is reducing the benefits from hedging and therefore he advises to evaluate the usage of hedging for each firm individually. The lacking expertise to decide about hedges in SME is also identified by Eckbo, According to his findings, smaller companies often lack the understanding and management capacities needed to use those instruments.5.M ETHODOL OGYE OF FINANC IAL ANAL YSIS IN SM E R ISK M ANAGEM ENTHow financial analysis can be used in SME risk management?5.1.1 Development of financial r isk over view for SM EThe following sections show the development of the financial risk overview. After presenting the framework, the different ratios will be discussed to finally present a selection of suitable ratios and choose appropriate comparison data.5.1.2.Fr a mewor k for fina ncial r isk over viewThe idea is to use a set of ratios in an overview as the basis for the financial risk management.This provides even more information than the analysis of historicaldata and allows reacting fast on critical developments and managing the identified risks. However not only the internal data can be used for the risk management. In addition to that also the information available in the papers can be used.Some of them state average values for the defaulted or bankrupt companies one year prior bankruptcy -and few papers also for a longer time horizon. Those values can be used as a comparison value to evaluate the risk situation of the company. For this an appropriate set of ratios has to be chosen.The ratios, which will be included in the overview and analysis sheet, should fulfill two main requirements. First of all they should match the main financial risks of the company in order to deliver significant information and not miss an important risk factor. Secondly the ratios need to be relevant in two different ways. On the one hand they should be applicable independently of other ratios. This means that they also deliver useful information when not used in a regression, as it is applied in many of the papers. On the other hand to be appropriate to use them, the ratios need to show a different development for healthy companies than for those under financial distress. The difference between the values of the two groups should be large enough to see into which the observed company belongs.5.1.3.Eva lua tion of r a tios for fina ncia l r isk over v iewWhen choosing ratios from the different categories, it needs to be evaluated which ones are the most appropriate ones. For this some comparison values are needed in order to see whether the ratios show different values and developments for the two groups of companies. The most convenient source for the comparison values are the research papers as their values are based on large samples of annual reports and by providing average values outweigh outliers in the data. Altman shows a table with the values for 8 different ratios for the five years prior bankruptcy of which he uses 5, while Porporato & Sandin use 13 ratios in their model and Ohlson bases his evaluation on 9 figures and ratios [10]. Khong, Ong & Yap and Cerovac & Ivicic also show the difference in ratios between the two groups, however only directly before bankruptcy and not as a development over time [9]. Therefore this information is not as valuable as the others ([4][15]).In summary, the main internal financial risks in a SME should be covered by financial structure, liquidity and profitability ratios, which are the main categories of ratios applied in the research papers.Fina ncial str uctur eA ratio used in many of the papers is the total debt to total assets ratio, analyzing the financial structure of the company. Next to the papers of Altman, Ohlson and Porporato & Sandin also Khong, Ong & Yap and Cerovac & Ivicic show comparison values for this ratio. Thosedemonstrate a huge difference in size between the bankrupt and non-bankrupt groups.Figur e 1: Development of tota l debt/tota l a ssets r a tioData sour ce: Altman (1968), Por por a to & Sandin (2007) and Ohlson (1980), author ’s illustr a tionTherefore the information of total debt/total assets is more reliable and should rather be used for the overview. The other ratios analyzing the financial structure are only used in one of the papers and except for one the reference data only covers the last year before bankruptcy. Therefore a time trend cannot be detected and their relevance cannot be approved.C ost of debtThe costs of debt are another aspect of the financing risk. Porporato & Sandin use the variable interest payments/EB IT for measuring the debt costs. The variable shows how much of the income before tax and interest is spend to finance the debt. This variable also shows a clear trend when firms approach bankruptcy.L iquidityThe ratio used in all five papers to measure liquidity is the current ratio, showing the relation between current liabilities and current assets (with slight differences in the definition). Instead of the current ratio, a liquidity ratio setting the difference between current assets and current liabilities, also defined as working capital, into relation with total assets could be used.Figur e 2: Development of wor king capita l /total assets r a tioData sour ce: Altman (1968) and Ohlson (1980); author ’s illustr a t ioBasically the ratio says whether the firm would be able to pay back all its’current liabilities by using its’current assets. In case it is not able to, which is when the liabilities exceed the assets, there is an insolvency risk.6.C R ITIC AL R EVIEW AND C ONC L USIONWhen doing business, constantly decisions have to be made, whoseoutcome is not certain and thus connected with risk. In order to successfully cope with this uncertainty, corporate risk management is necessary in a business environment, which is influenced by market frictions. Different approaches and methods can be found for applying such a risk management. However, those mainly focus on large corporations, though they are the minority of all companies[13].Furthermore the approaches often require the use of statistical software and expert knowledge, which is most often not available in SME. They and their requirements for risk management have mainly been neglected [17][13].This also includes the internal financial risk management, which was in the focus of this paper. Due to the existing risks in SME and their differences to larger corporations as well as the lack of suitable risk management suggestions in theory, there is a need for a suggestion for a financial risk management in SME. The aim was to find a possible mean for the risk identification, analysis and monitoring, which can be applied by SME to manage their internal financial risks. For this purpose the financial analysis, which has been used in research to identify indicators for firm bankruptcy, was chosen. Based on an examination and analysis of different papers, despite of their different models, many similarities in the applied ratios could be identified. In general the papers focus on three categories of risk, namely liquidity, profitability and solvency, which are in accordance to the maininternal financial risks of SME. From the ratios the most appropriate ones with regard to their effectiveness in identifying risks.译文中小企业财务风险管理研究奥米德沙利菲1、摘要中小型企业( SME) 和大型企业一样,也面临着业务风险,在最糟糕的情况下,可能会导致金融危机,甚至破产。
财务风险管理的定义和内容
财务风险管理的定义和内容Financial risk management is the process of identifying, analyzing, and addressing potential risks within an organization's financial operations. It involves assessing the potential impact of various risks on the organization's ability to achieve its financial goals and implementing strategies to mitigate or eliminate those risks. 财务风险管理是识别、分析和解决机构财务运营中潜在风险的过程。
它涉及评估各种风险对机构实现财务目标的潜在影响,并实施策略来减轻或消除这些风险。
Financial risks can arise from a variety of sources, including market fluctuations, economic downturns, and changes in regulations or policies. By proactively managing these risks, organizations can protect themselves from financial losses and maintain stability in uncertain times. 财务风险可以来源于各种因素,包括市场波动、经济下滑以及法规或政策的变化。
通过积极管理这些风险,机构可以保护自己免受财务损失,并在不确定的时期保持稳定。
One key aspect of financial risk management is identifying and assessing the different types of risks that may impact an organization's financial health. This involves conducting thoroughrisk assessments and developing risk management strategies tailored to the specific needs of the organization. 财务风险管理的一个关键方面是识别和评估可能影响机构财务健康的不同类型风险。
财务风险管理是一个增值活动吗文献翻译
原文:Financial risk management: is it a value-adding activity Financial risk management is a process to deal with the uncertainties resulting from financial markers. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Considering whether financial risk management is value-adding. Although risk management can reduce total risk, this may not affect the cost of capital or firm value. Well-diversified investors have already eliminated all of the specific risk, and risk-management may be seen as a zero NPV activity at best, and at worst, a value-reducing activity. However, there is a role for risk management. Reduction of total risk may reduce the expected costs of financial distress, this increases firm value. Present a method of investment appraisal that takes account of total risk through expected financial distress costs. Such a method can result in three possible decisions relating to a new project; reject the project invest in the project; and risk-manage; or invest in the project but do not risk-manage. Finally, presents worked examples.When considering a firm’s financial risk management activities, we may ask two questions; why do firms engage in such activities, and how do they do it How firms engage in risk-management has been extensively considered.Methods typically involve combining financial instruments such as shares, bonds, options and futures, in order to obtain a desired payoff profile see Smith and Smithson 1998 for an excellent analysis.In this paper, we consider the more controversial question; why botherwith financial risk-management Is financial risk-management value adding Shapiro and Titman 1998 consider this question of whether risk management is desirable. A firm’s total risk consists of two elements; market risk which measures the sensitivity of the firm’s stock price to market-wide movements, and specific risk which measures the stock price movements which are specific to the firm, and independent of market movements. According to the CAPM and APT models, well-diversified investors hol d portfolios that have already eliminated all of a firm’s specific risk, but investors cannot eliminate market risk. The equilibrium market price of each firm’s shares in the portfol io is such that expected returns only compensate investors for holding market risk, as embodied in a firm’s beta. As such, risk-management activities by the firm are irrelevant in the sense that they are unable to add value. These activities may reduce total risk, but diversified investors have already done so by eliminating all of the specific risk. Hence, risk management activities will not increase the market price of the firm’s shares.Shapiro and Titman 1998 argue that, since financial instruments are fairly priced, and compensate investors for market risk only, hedging risk through financial instruments is, at best, a zero net present value NPV activity. In the worst scenario, risk management may actually be value reducing, since it may be a costly activity in terms of time and resources.Risk management irrelevance can be analysed as follows. Consider the value of the firm as the sum of the discounted value of expected future cashflows. That is, if the firm is expecting cashflows of X1 in year i, and the firm discounts at a cost of capital r, then firm value V is given by: V1=X1/1+r + X2/1+r^2+…1 The cost of capital or the investors’required return includes an element for market risk. The firm’s risk management activities reduce total risk, but this will not affect the market risk. Therefore, the firm’s beta will be unchanged, and hence the cost of capital r will remain the same.Having demonstrated how risk management may be at best an irrelevant activity, Sheperd and Titman 1998 proceed to rescue risk management by showing that it can have an effect on firm value. They argue that total risk does matter, through its effects on the cashflows. A high level of total risk may increase expectations of financial distress, hence reducing the expected cashflows, and reducing firm value. Risk management aimed at reducing total risk, although not affecting the discount rate, may increase expected cashflows, which would be value increasing.Furthermore, a firm’s managers have an incentive to engag e in risk management, even if this is not value increasing. A single firm’s financial distress may not be of much concern for a well-diversified investor. However, it could be disastrous for the management of that firm, in terms of loss of employment and reputation. It may be argued that management has a private discount rate which reflects total risk, and hence exceeds the social discount rate r. Since the firm is valued in the market using r, the management would have a lower private valuation of the firm than the market. Risk management could then be viewed as management’s attempts to increase their private valuation towards the market valuation.Should we adjust the discount rateShimko 2001 argues that well-diversified investors do not exist. Therefore, the NPV method of investment appraisal may be flawed, since it uses a discount rate that only reflects market risk. He proposes an adjustment to the NPV method in order to take account of total risk. His risk-adjusted present value RPV method attacks the problem by adjusting the discount rate.Shimko’s RPV approach is derived as follows.Consider a one period investment project with present value V1at time 0 this is the amount that the investor is prepared to pay at time 0, and is defined as cash capital. The time 1 cashflow provided by the projectis a normally distributed random variable with mean μ 1 and standard deviation σ 1. Shimko assumes that the cashflow is not correlated with any market risk factors. The risk-free rate is r.The investor requires a return on his/her cash capital and his/her risk capital. Risk capital is the maximum amount that the investor might lose on the project over the year. In order to derive risk capital, the firm must define a “worst case” time 1 cashflow, W1=μ1 is, the worst case cashflow is z standard deviations below the mean. The present value of the worst case cashflow is W0=W1/ 1+r. Hence, risk capital =V0W0.The expected capital gain over the year is: μ1-V=rV0+kV0-W0 2The left-hand side shows that the expected capital gain is the expected time 1 value that is, the mean minus the initial cash investment. The right-hand side partitions this expected gain into the return on cash capital rV0 plus the return on risk capital k V0W0.Shimko re-arranges 2 to provide the following formulation:V0=μ1/ 1+r – k/ 1+r+kzσ1/ 1+r 3This suggests that the value of the project equals its NPV value minus a risk charge that is proportional to the difference between the expected value and the worst case value.“The project’s cash flows are not correlated”Note that, since it is assumed that the project’s cashflows are not correlated with the market, the NPV is found by discounting the expected cashflow at the risk-free rate. Shimko points out that we obtain the NPV formulation, V0=μ1/ 1+r, as a special case when k= 0. Furthermore, as k= ≥ ∞ the value of the asset approaches its worst case value W0. Hence, the value of the asset is affected by total risk, and particularly the value-at-risk.This approach emphasises that, when there are limitations to portfolio diversification, investors and managers become concerned with total risk. The RPV method allows us to focus on a crucial element of riskmanagement; the value-at-risk. A potential drawback is that the value V0 is affected b y different agents’ private valuations, either through k, or through the choice of W0since this choice affects z. Indeed, the author presents numerical examples that show that NPV valuation can be much greater than the subjective RPV valuation. Therefore, using RPV could have serious problems for investment appraisal. It is possible that the RPV method could lead to incorrect project acceptance/rejection decisions.It is better to adjust the cashflowsIn this section, we provide an approach to investment appraisal based upon Shapiro and Titman 1998 rather than Shimko 2001. The goal of investment appraisal is to identify and accept value-increasing projects. This method should reflect the market valuation of the project. If we assume that the CAPM formulation is robust, and that investors are only rewarded for holding market risk, it is better to adjust the cash-flows rather than the discount rate. In our analysis, we retain the idea of value-at-risk, specifically relating it to financial distress.Consider a one period investment opportunity that requires investment of l at time 0. The time 1 cashflow X is normally distributed, with mean μ1 and standard deviation σ1. Furthermore, if the realised cashflow is less than l, the firm faces financial distress. This carries a cost of F, where F reflects disruption to services, loss of reputation, legal costs and so forth. The expected cost of financial distress is E F =F Pr ob{X < l}. In our subsequent worked example, we show that calculation of E F is straightforward.The cost of capital k reflects market not total risk. The project’s present value equals the present value of expected cashflows minus the present value of financial distress costs:V0=μ1/ 1+k –E F/ 1+k 4Note that this is analogous to the RPV formulation 3. Like the RPV model, our valuation formula takes account of the value-at-risk. However,we explicitly model this as financial distress, and we introduce it in the cashflow, rather than the discount rate.The NPV formula is:NPV=-l+ μ1-E F/ 1+k 5The firm takes the project if NPV ≥ 0, since this will be value-increasing.Like the RPV model, we can incorporate private valuations through the E F term. Let F represent the costs of financial distress to well-diversified investors, and let Fm represent the costs of financial distress to the firm’s management. Due to the arguments relating to well-diversified investors versus non-diversified managers set out previously, we would expect Fm >F. Management may be tempted to incorporate the expected value E Fm into the NPV formula such that: NPVm=-lμ1-E F/ 1+k <NPV 6If NPVm < 0 < NPV, self-interested management may reject a value-increasing project. We do not pursue this avenue in this paper. Instead, we assume that managers act in the interests of shareholders.“Sufficiently to eliminate financial distress”Risk-management and its effect on firm valueAssume that management can spend an amount C on risk-management activities. Furthermore, assume that this activity reduces total risk sufficiently to eliminate financial distress. If the management takes the project and carries out risk-management activities, the NPV will be: NPV=-l-C+μ1/ 1+k, 7 where the subscript rm signifies NPV after risk-management.If the management takes the project and does not carry out risk management activities, NPV is given by 5.Note that NPVrm > NPV if E F/ 1 + k > C. This means that risk management activities are worthwhile if the elimination of the present value of financial distress costs exceeds the expenditure required on riskmanagement activities.The project acceptance and risk management decision rules are as follows:Take the project, and risk manage if NPVrm>0, and NPVrm>NPV. Risk-management activities are value-adding, and the project has a positive NPV after such activities.Take the project, but do not risk-manage, if NPV>0, and NPV>NPV. Risk-management activities are value-reducing,but the project has a positive NPV without them.Reject the project if 0 > NPVrm > NPV, or 0 > NPV > NPVrm. In this case, we reject the project, whether risk-management activities are value-adding or value-reducing.Conclusion: Financial risk-management activities can reduce total risk. This may be value-adding if it reduces the cost of financial distress. If investors are well-diversified, and if CAPM is robust, then the reduction of total risk should not affect the cost of capital. Therefore, following Shapiro and Titman 1998, we have analysed the effects of risk-management on firm value through the cashflows, rather than through the discount rate. We develop a method of investment appraisal that takes account of total risk through expected financial distress costs. Such a method can result in three possible decisions relating to a new project:1 Refuse to this project;2 Investment and risk management;3 Investment projects but no risk management.Source: Richard Fairchild,2002. “Financial risk management: is it a value-adding activity”.Balance Sheet,,,.译文:财务风险管理:这是一个增值活动财务管理风险是应对财务市场导致的不确定性的过程.它包含评估企业面临的财务风险和制定财务风险管理战略,管理战略的制定应与企业内部的优先事项和政策相一致.积极应对财务风险能提高企业的竞争力,确保管理层、业务人、利益相关者和董事会在有关风险的重大问题上达成一致.财务风险管理考虑的是是否能增值.尽管风险管理可以降低总的风险,但这可能不会影响资本或公司价值的成本,投资者们已经主张消除所有的特定风险和风险管理,这可以被看作是一个净现值为零时的最好活动,而最坏的情况则是一个减值活动.然而,风险管理有这样一个作用,即总风险减少可能会减少财务危机,从而增加公司价值的预期成本.目前的投资评估方法,通过预期的财务危机成本来考虑总风险.这种方法在一个新项目中可能会导致三种决定:拒绝在该项目中投资;风险管理;或投资该项目,但没有风险管理.在考虑企业的财务风险管理活动时,我们可能会问到两个问题,企业为什么从事这些活动他们是怎样做到的而企业如何参与风险管理,也已经被广泛地考虑.具有代表性的金融工具比如说股票、债券、期货和期权等,以获取所需的财务分析见史密斯和史密森的一个精辟的分析.在本文中,我们来考虑较有争议的问题,为什么要参与财务管理风险财务风险管理是否增值夏皮罗和特曼1998认为考虑风险管理这个问题是可取的.一个企业的总风险包括两个组成部分,市场风险用来衡量该公司的股票价格敏感度在市场范围内的运动,及特定风险衡量股票价格所特有的变动方向,以及市场走势的独立性.根据CAPM和APT模型,充分多元化的投资者认为持有投资组合可以消除一个公司所有的特定风险,但投资者不能消除市场风险.平衡市场价格的各个企业的投资组合的股份,是补偿投资者在市场风险中的预期回报率,主要体现在公司的贝塔系数上.作为管理活动的企业等,风险是不相关的,即他们无法增加价值.这些活动可能会降低总的风险,但已经做了消除所有的特殊风险,因此风险管理活动不会增加该公司的股票的市场价格.夏皮罗和特曼1998认为,由于金融工具的公平定价,并弥补市场风险的唯一投资者,通过金融工具的套期保值,充其量是一个零净现值净现值活动的风险.在最坏的情况下,风险管理,实际上其价值可能是减少的,因为它可能是一个昂贵的时间和资源方面的活动.风险管理无关可分析如下,考虑到该公司把现金流的价值总和作为未来预期的贴现值.也就是说,如果公司在i年的预期现金流为X1,资本成本率为r,那么公司的价值V就为:V0=X1/1+r+X2/1+r ^2+…1资本成本率或投资者要求的回报包括市场风险因素.该公司的风险管理活动降低总的风险,但这不会影响市场风险.因此,该公司的贝塔系数将保持不变,因此资本成本r也将保持不变.经演示了如何风险管理可能充其量是一个毫不相干的活动,谢德和特曼1998通过表明它能够对公司价值产生影响来拯救风险管理.他们认为,总的风险是重要的,通过其能影响现金流量的问题.一个高水平的总风险可能会增加财务危机的预期,从而降低了预期现金流量,降低了公司价值.风险管理目的在于降低总风险,但不影响折现率,预期现金流量可能会增加,这将使其价值增加.此外,公司的管理者有动力参与风险管理,即使这是不是价值增加.一个企业的财务困境,可能不会太关注一个主张的投资者.不过,这也可能对该公司管理具有灾难性的,从而影响就业和声誉.也可以这样说,管理层有一个私人的折现率反映总的风险,因此超出了社会折现率.由于该公司的价值在市场上是使用社会折现率来估价,管理层将有一个低于市场的私人公司的估值.风险管理便可以看作是管理层试图增加对市场估值的私人估价.我们是否应该调整贴现率史默克2001认为,充分多元化的投资者不存在.因此,投资评价净现值法可能是有缺陷的,因为它使用的折现率只反映市场风险.他提出了一个调整的净现值法,以承担风险的帐户总数的百分比.他的风险调整后的现值系统RPV方法有力的解决了贴现率的调整问题.史默克的遥控飞行器方法推导如下:考虑到在时间0时,一个投资项目在目前的价值为V0.这是在时间0时投资者愿意支付的金额,并以现金资本定义.在时间1时,该项目提供的现金流量是一个正态分布的随机变量μ1和标准差σ1.史默克假设现金流量不与任何市场风险因素相关,无风险利率值为r.投资者的资本回报是要求他/她的现金资本和他/她的风险之和.风险资本的最高金额就代表投资者可能会失去在该年度项目.为了得到风险资金,公司必须定义“最坏情况”下的现金流,W1=μ1−z2,也就是说,最坏的情况下的现金流是低于z标准差的.而现金流量现值最严重的情况是W0=W1/1+R,因此,风险资本=V0-W0.这一年的预期资本增益是:μ1-V=rV0+kV0-W0 2左边显示的是预期资本收益是预期时间在1时的值即平均值减去初始现金投资.右边这个分区是现金资本回报加上风险投资回报.史默克针对公式2重新提出了以下公式:V0=μ1/ 1+r – k/ 1+r+kzσ1/ 1+r 3他认为该项目的价值等于其净现值减去风险费用是不同于期望值和最坏条件下的价值.“该项目的现金流量是不相关的”请注意,因为它是假设该项目的现金流是不与市场相关的,净现值是在贴现的无风险利率的预期现金流量中发现的.史默克指出,我们得到的净现值公式,V0=μ1/ 1+r,是在当K=0时的特殊情况下的.此外,当K = ≥∞时,资产的价值接近其最坏情况时的价值W0.因此,资产的价值是受总风险的影响,特别是高风险价值.这种方法强调的是,当投资组合多样化受到限制时,投资者和管理者就会变得关心总风险.该遥控飞行器方法使我们更专注于风险管理的关键要素:风险价值.一个潜在的缺点是价值V0是受到不同代理商的私人估价影响的,无论是通过k,或者通过选择W0因为这个选择会影响z的.事实上,笔者提出数例表明净现值估价要大于主观的遥控飞行器估价.因此,使用遥控飞行器进行投资评估可能有严重问题,该遥控飞行器可能会导致不正确的工程验收/拒绝决定.最好是调整现金流.在本节中,我们提供一个投资评估的方法,主要根据夏皮罗和曼特1998而不是史默克2001.投资评估的目的是识别和接受那些增值项目.这种方法反映的是项目的市场价值,如果我们假设资本资产定价模型的构想是强劲的,投资者仅持有市场风险的回报,最好是调整现金流量而不是贴现率.在我们的分析中,我们保留了高风险价值的概念,具体涉及到财务危机.考虑一个周期的投资机会需要投资l在时间0时,时间-现金流量是成正态分布的,均值为μ1和标准差为σ1.此外,如果实现的现金流比l少,该公司就会面临财务危机.这就带来了成本F,其中F反映了服务的中断,名誉的损失和法律成本等等.发生财务危机的预期成本为EF=FProb{X<l}.在我们后续的例子中,我们将证明EF的计算是明确的.资本成本k反映的是市场风险不是全部.该项目的现值等于预期现金流量减去财务危机成本的现值:V0=μ1/1+k–EF/1+k 4请注意,这类似于遥控飞行器公式.像遥控飞行器模型,我们的评估公式考虑了风险价值.然而,我们明确的模拟了这种财务危机,并且我们介绍了其现金流,而不是折现率.净现值计算公式为:NPV=-l+ μ1-EF/1+k 5如果该公司项目的净现值>=0,那么这将是价值增值.像遥控飞行器模型,我们将可以通过EF的长期私人估价.设F为多元化投资者的财务危机成本,Fm为公司管理的财务危机成本.由于先前相关的论点多数是多元化的投资者与非多样化管理者的比较,我们期望Fm>F.管理部门可能总想期望值E Fm包含在净现值公式中:NPVm=-lμ1-E F/ 1+k <NPV 6如果NPVm < 0 < NPV,,自利的管理部门可能会拒绝这个价值增加的项目.在本文中,我们不追求这种途径.相反,我们认为管理者在扮演股东利益的角色.“充分消除财务危机”风险管理及其对企业价值的影响假设管理部门在风险管理活动可以花费的金额为C.此外,假设这项活动的总风险可以降低到足以消除财务危机.如果管理部门需要这个项目并进行风险管理活动,净现值为:NPV=-l-C+μ1/1+k,7这里的rm标志着风险管理之后的净现值.如果管理部门需要这个项目但并没有进行风险管理活动,那么净现值根据公式5.请注意,如果NPVrm > NPV E F/1 + k> C.这意味着如果有价值的财务困境成本的现值超过消除的风险管理活动所需的开支,风险管理活动是值得的,该项目验收和风险管理决策规则如下:如果NPVrm>0,以及NPVrm>NPV,参与该项目并进行风险管理,风险管理活动是增值的,以及该项目在以后这样的活动中将会具有一个正的净现值.如果NPV>0,以及NPV>NPV,参加该项目但不进行风险管理,风险管理活动是减值的,但该项目没有一个没有风险管理活动的项目净现值.拒绝的项目,如0 > NPVrm > NPV,或者 0 > NPV > NPVrm.在这种情况下,无论是风险管理活动的增值或价值降低,我们都拒绝该项目.结论:财务风险管理活动可以降低整体风险.如果它降低成本的财务危机,这就可能是增值.如果投资者充分分散,如果CAPM是强大的,那么减少风险,然后减少总风险不应影响资本成本.因此,证明夏皮罗和特曼1998年,我们分析了影响公司价值的风险管理上的现金流,而不是通过贴现率.我们开发了一种投资评价方法,充分考虑了财务整体风险的成本压力.这种方法可能导致一个新项目三种有关的决定:1拒绝这个项目;2投资和风险管理;3投资项目,但没有风险管理.出处:理查德费尔柴尔德,财务风险管理:这是一个增值活动,资产负债表,第10卷4,2002:22-25.。
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本科毕业论文(设计)外文翻译Financial Risk ManagementAlthough financial risk has increased significantly in recent years, risk and risk management are not contemporary issues. The result of increasingly global markets is that risk may originate with events thousands of miles away that have nothing to do with the domestic market. Information is available instantaneously, which means that change, and subsequent market reactions, occur very quickly. The economic climate and markets can be affected very quickly by changes in exchange rates, interest rates, and commodity prices. Counterparties can rapidly become problematic. As a result, it is important to ensure financial risks are identified and managed appropriately. Preparation is a key component of risk management.What Is Risk?Risk provides the basis for opportunity. The terms risk and exposure have subtle differences in their meaning. Risk refers to the probability of loss, while exposure is the possibility of loss, although they are often used interchangeably. Risk arises as a result of exposure.Exposure to financial markets affects most organizations, either directly or indirectly. When an organization has financial market exposure, there is a possibility of loss but also an opportunity for gain or profit. Financial market exposure may provide strategic or competitive benefits.Risk is the likelihood of losses resulting from events such as changes in market prices. Events with a low probability of occurring, but that may result in a high loss, are particularly troublesome because they are often not anticipated. Put another way, risk is the probable variability of returns.Since it is not always possible or desirable to eliminate risk, understanding it is an important step in determining how to manage it.Identifying exposures and risks forms the basis for an appropriate financial risk management strategy.How Does Financial Risk?Financial risk arises through countless transactions of a financial nature, including sales and purchases, investments and loans, and various other business activities. It can arise as a result of legal transactions, new projects, mergers and acquisitions, debt financing, the energy component of costs, or through the activities of management, stakeholders, competitors, foreign governments, or weather. When financial prices change dramatically, it can increase costs, reduce revenues, or otherwise adversely impact the profitability of an organization. Financial fluctuations may make it more difficult to plan and budget, price goods and services, and allocate capital.There are three main sources of financial risk:1. Financial risks arising from an organization’s exposure to changes in market prices, such as interest rates, exchange rates, and commodity prices.2. Financial risks arising from the actions of, and transactions with, other organizations such as vendors, customers, and counterparties in derivatives transactions3. Financial risks resulting from internal actions or failures of the organization, particularly people, processes, and systemsWhat Is Financial Risk Management?Financial risk management is a process to deal with the uncertainties resulting from financial markets. It involves assessing the financial risks facing an organization and developing management strategies consistent with internal priorities and policies. Addressing financial risks proactively may provide an organization with a competitive advantage. It also ensures that management, operational staff, stakeholders, and the board of directors are in agreement on key issues of risk.Managing financial risk necessitates making organizational decisions about risks that are acceptable versus those that are not. The passive strategy of taking no action is the acceptance of all risks by default.Organizations manage financial risk using a variety of strategies and products. It is important to understand how these products and strategies work to reduce risk within the context of the organization’s risk tolerance and objectives.Strategies for risk management often involve derivatives. Derivatives are traded widely among financial institutions and on organized exchanges. The value of derivatives contracts, such as futures, forwards, options, and swaps, is derived from the price of the underlying asset. Derivatives trade on interest rates, exchange rates, commodities, equity and fixed income securities, credit, and even weather.The products and strategies used by market participants to manage financial risk are the same ones used by speculators to increase leverage and risk. Although it can be argued that widespread use of derivatives increases risk, the existence of derivatives enables those who wish to reduce risk to pass it along to those who seek risk and its associated opportunities.The ability to estimate the likelihood of a financial loss is highly desirable. However, standard theories of probability often fail in the analysis of financial markets. Risks usually do not exist in isolation, and the interactions of several exposures may have to be considered in developing an understanding of how financial risk arises. Sometimes, these interactions are difficult to forecast, since they ultimately depend on human behavior.The process of financial risk management is an ongoing one. Strategies need to be implemented and refined as the market and requirements change. Refinements may reflect changing expectations about market rates, changes to the business environment, or changing international political conditions, for example. In general, the process can be summarized as follows:1、Identify and prioritize key financial risks.2、Determine an appropriate level of risk tolerance.3、Implement risk management strategy in accordance with policy.4、Measure, report, monitor, and refine as needed.DiversificationFor many years, the riskiness of an asset was assessed based only on the variability of its returns. In contrast, modern portfolio theory considers not only an asset’s riskiness, but also its contribution to the overall riskiness of the portfolio to which it is added. Organizations may have an opportunity to reduce risk as a result of risk diversification.In portfolio management terms, the addition of individual components to a portfolio provides opportunities for diversification, within limits. A diversified portfolio contains assets whose returns are dissimilar, in other words, weakly or negatively correlated with one another. It is useful to think of the exposures of an organization as a portfolio and consider the impact of changes or additions on the potential risk of the total.Diversification is an important tool in managing financial risks. Diversification among counterparties may reduce the risk that unexpected events adversely impact the organization through defaults. Diversification among investment assets reduces the magnitude of loss if one issuer fails. Diversification of customers, suppliers, and financing sources reduces the possibility that an organization will have its business adversely affected by changes outside management’s control. Although the risk of loss still exists, diversification may reduce the opportunity for large adverse outcomes.Risk Management ProcessThe process of financial risk management comprises strategies that enable an organization to manage the risks associated with financial markets. Risk management is a dynamic process that should evolve with an organization and its business. It involves and impacts many parts of an organization including treasury, sales, marketing, legal, tax, commodity, and corporate finance.The risk management process involves both internal and external analysis. The first part of the process involves identifying and prioritizing thefinancial risks facing an organization and understanding their relevance. It may be necessary to examine the organization and its products, management, customers, suppliers, competitors, pricing, industry trends, balance sheet structure, and position in the industry. It is also necessary to consider stakeholders and their objectives and tolerance for risk.Once a clear understanding of the risks emerges, appropriate strategies can be implemented in conjunction with risk management policy. For example, it might be possible to change where and how business is done, thereby reducing the organization’s exposure and risk. Alternatively, existing exposures may be managed with derivatives. Another strategy for managing risk is to accept all risks and the possibility of losses.There are three broad alternatives for managing risk:1. Do nothing and actively, or passively by default, accept all risks.2. Hedge a portion of exposures by determining which exposures can and should be hedged.3. Hedge all exposures possible.Measurement and reporting of risks provides decision makers with information to execute decisions and monitor outcomes, both before and after strategies are taken to mitigate them. Since the risk management process is ongoing, reporting and feedback can be used to refine the system by modifying or improving strategies.An active decision-making process is an important component of risk management. Decisions about potential loss and risk reduction provide a forum for discussion of important issues and the varying perspectives of stakeholders.Factors that Impact Financial Rates and PricesFinancial rates and prices are affected by a number of factors. It is essential to understand the factors that impact markets because those factors, in turn, impact the potential risk of an organization.Factors that Affect Interest RatesInterest rates are a key component in many market prices and an important economic barometer. They are comprised of the real rate plus a component for expected inflation, since inflation reduces the purchasing power of a lender’s assets .The greater the term to maturity, the greater the uncertainty. Interest rates are also reflective of supply and demand for funds and credit risk. Interest rates are particularly important to companies and governments because they are the key ingredient in the cost of capital. Most companies and governments require debt financing for expansion and capital projects. When interest rates increase, the impact can be significant on borrowers. Interest rates also affect prices in other financial markets, so their impact isfar-reaching.Other components to the interest rate may include a risk premium to reflect the creditworthiness of a borrower. For example, the threat of political or sovereign risk can cause interest rates to rise, sometimes substantially, as investors demand additional compensation for the increased risk of default.Factors that influence the level of market interest rates include:1、Expected levels of inflation2、General economic conditions3、Monetary policy and the stance of the central bank4、Foreign exchange market activity5、Foreign investor demand for debt securities6、Levels of sovereign debt outstanding7、Financial and political stabilityYield CurveThe yield curve is a graphical representation of yields for a range of terms to maturity. For example, a yield curve might illustrate yields for maturity from one day (overnight) to 30-year terms. Typically, the rates are zero coupon government rates.Since current interest rates reflect expectations, the yield curve provides useful information about the market’s expectations of future interest rates.Implied interest rates for forward-starting terms can be calculated using the information in the yield curve. For example, using rates for one- and two-year maturities, the expected one-year interest rate beginning in one year’s time can be determined.The shape of the yield curve is widely analyzed and monitored by market participants. As a gauge of expectations, it is often considered to be a predictor of future economic activity and may provide signals of a pending change in economic fundamentals.The yield curve normally slopes upward with a positive slope, aslenders/investors demand higher rates from borrowers for longer lending terms. Since the chance of a borrower default increases with term to maturity, lenders demand to be compensated accordingly.Interest rates that make up the yield curve are also affected by the expected rate of inflation. Investors demand at least the expected rate of inflation from borrowers, in addition to lending and risk components. If investors expect future inflation to be higher, they will demand greater premiums for longer terms to compensate for this uncertainty. As a result, the longer the term, the higher the interest rate (all else being equal), resulting in anupward-sloping yield curve.Occasionally, the demand for short-term funds increases substantially, and short-term interest rates may rise above the level of longer term interest rates. This results in an inversion of the yield curve and a downward slope to its appearance. The high cost of short-term funds detracts from gains that would otherwise be obtained through investment and expansion and make the economy vulnerable to slowdown or recession. Eventually, rising interest rates slow the demand for both short-term and long-term funds. A decline in all rates and a return to a normal curve may occur as a result of the slowdown.Source: Karen A. Horcher, 2005. “What Is Financial Risk Management?”.Essentialsof Financial Risk Management, John Wiley & Sons, 财务风险管理尽管近年来金融风险大大增加,但风险和风险管理不是当代的主要问题。