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Enterprise Risk Management in simple terms is defined as the methods and procedures used by different organizations managing the risks and seizing the opportunities related to the achievements in their business organizations.
Enterprise Risk Management in any said to a part of any business lexion and understanding managing the risks at its most important concern. The Risk is said to be inherint in the Business. When Given importance risk management it is not shocking that risk management is receiving scrunity from the top business organizations, banks, financial institutions and many more.
Interest Rate Risk: It is generally the adverse effect of the interest rate movements on the profit of a particular firm or the balance sheet. It is affected in two major ways one is by affecting the firms and the other is through the assets or the liabilities.
Financial Risks: Generally refers to the bankruptcy and the possibility of the firm who is not able to repay the debts on time.
Higher the debt equity ratio firm higher would be the financial risks faced by it.
Liquidity risks and having the wrong capital structure are the major reasons for the financial risks.
Business Risks: Risks faced by most of the business organizations from the internal and the external environment.
Labour strike, death of key personal and machinery break down etc are some of the internal causes.
External Causes would include government policy, changes in the customers preferences etc.
Market Risks: It is generally the value of all the investment firms going down as a result of the movements caused in the market. Market Risks is also know as the price risks.
Changing form of Enterprise Risk Management We all know that enterprise risk management is associated with each and every business. But when it comes to financial system risk is not apparent. The earlier ethos detect, inspect, react have been substituted with some of the major concepts like anticipate, prevent, monitor and mitigate.
Enterprise Risk Management involves the following techniques. Internal Techiques: Internal Techniques here are the part of the day to day operations of the particular firm. External Risks: They are the ones who require the company to enter the financial contract with the market entity.
Management of Business Risk: Some of the businesses are not manageable, they are something that have to be borne. Asset Liability Management: Is generally an effort put to minimize the exposure to the price risk along with the combination of assets and liabilities in order to meet up the needs and requirements of the firm.