Entrepreneurship has the main goal - to get the maximum income and at the same time bear the minimum cost of capital, and in conditions of always competitive struggle. But in order to realize this goal, it is necessary to compare the size of investments with financial performance.
You must always be prepared for the fact that in carrying out any economic activity, there is always a risk (danger) of losses, and their volume, as a rule, is due to the specifics of a particular type of business. So, the risk is called the probability of losses, losses, shortfalls in profits or planned revenues.
The financial manager considers the risk a probability of an adverse outcome. Therefore, the company must create a financial risk management system. Risk may or may not occur. In any case, the result will be either loss, loss, damage, or a zero result will be obtained, or it will be profit, profit, gain. Experts believe that without risk, business cannot be successful. Therefore, financial risk management is of particular importance.
Financial risk management is the use of all kinds of measures that allow, to one degree or another, to predict the occurrence of a risk situation and immediately take measures to reduce the degree of risk. Whether financial risk management will be effective is often determined by their classification. We are talking about the distribution of risks into separate groups according to various criteria. The classification, which is scientifically substantiated, allows you to increase the effectiveness and make managing the financial risks of the organization more effective.
According to the possible outcome, risks are divided into speculative and pure. Clean - this is an opportunity to get a zero or negative result. These include environmental, natural, transport, political and some commercial (trade, production, property). Speculative risks are an opportunity to get not only negative, but also a positive result.
The causes of financial risks are inflationary factors. In addition, if the bank discount rates increase or the value of securities decreases, financial risks may also arise. They are divided into two groups: some of them are related to the purchasing power of money, while others are related to capital investment. The first group is deflationary and inflationary risks, liquidity risk, currency risks. The second group is the risk of lost profits, direct financial losses and reduced profitability.
In order to effectively manage financial risks, it is necessary to be able to correctly assess their magnitude and degree of manifestation. The degree of risk is the probability that a loss event will occur. The risk is acceptable, that is, there is simply the threat of an almost complete loss of profit due to the implementation of the project that was planned. Critical risk - such a risk, which may result in non-receipt of revenue, and losses will be covered at the expense of a particular entrepreneur. Catastrophic risk threatens with the loss of property, capital and bankruptcy in general. Assessing financial risks is not an easy task; it requires great knowledge and experience.
Financial risk management is a mechanism consisting of a special strategy and various methods of financial management. Its ultimate goal is to obtain the greatest profit under the condition of an acceptable, optimal ratio of risk to profit for the entrepreneur. The object of financial risk management is risk, a variety of risky investments of capital, as well as all economic relations of economic entities during the implementation of the risk. The subject of management is a special group of people (insurance specialist, financial manager, acquirer and others). They use different methods and techniques to act on the control object.