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Applied Financial Risk Management: Covering the Basics

What is Financial Risk Management (FRM)?

Financial risk management is the process to handle the uncertainties emanating from financial markets. It comprises assessing the financial risks of an enterprise and developing incisive management strategies consistent with internal policies and priorities.

Financial risk managers working under this domain formulate the procedures that need to be pursued when venturing for investments or addressing likely threats on behalf of the organization. IIM Raipur risk management courses impart valuable knowledge to risk management executives in setting financial rule frameworks to handle the risk exposure.

 

What are the financial risks?

Financial risks refer to the monetary loss incurred by the enterprises. Some risks can be managed and some are beyond control. Companies need to anticipate the risks, assess their impact, and be ready with the right strategy. Following are various types of risks:

Market risks: These risks occur due to movements in stock market prices and interest rates.

Credit Risk: This is the company’s own risk when formulating payment policies with suppliers and providing finance of purchases to its clients.

Liquidity Risk: This risk refers to the company’s capability to converts its assets into liquid cash in times of need.

The process of FRM can be summarized as follows:

  • To identify and prioritize vital financial risks
  • Determining an acceptable level of risk tolerance
  • Implementation of risk management strategy in tune with company policies
  • Measure, monitor, report and refine risk procedures as needed

 

 Strategies of FRM

Financial Risk Management techniques protect the valuable assets of the company and rein in uncontrolled expenses. Here’s a look at the different FRM strategies to protect your business.

  1. Comprehensive Risk Assessment

Organizations determine their vulnerabilities by conducting risk evaluations. Top management takes decisions after evaluating a variety of factors, such as:

  • Likelihood of a negative event
  • The root cause of the risk
  • Activities to manage or decrease the risk
  • Residual risk on the accomplishment of mitigating activities.
  1. Risk Focussed Practices

IIM Raipur risk management courses focus on training finance professionals in specific areas to analyse financial activities and controls. The focus is on cybersecurity and reliance on third-party contractors.

  1. Performance Improvement

Organizations can derive benefit from applied financial risk management courses by training their employees in conducting risk-focus assessments to improve performance. Performance improvement can be done by the following measures:

  • Governance and management
  • Operational efficiency
  • Structure and Staffing
  • Safety and Security

 

Key Benefits of Financial Risk Management

  • Providing procedure, policy, and process best practices
  • Guide efforts to revive policies and streamline processes
  • Increase training opportunities for financial risk professionals through IIM Raipur risk management courses.
  • Focus on testing and review of pre-determined weakness. This will help the organization to stay on top of risk and identify actionable opportunities for improvement.
  • Good FRM practices increase shareholder value by hedging risks.

  

Conclusion

All successful enterprises have to take risks to achieve growth and to sustain in highly competitive global markets. MNCs are on the lookout for talented risk management professionals who’ve completed applied financial risk management courses to overcome the uncertainties of international and domestic markets.

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