Financial Risk Management techniques

risk_mgmt.pngThere are four risk management techniques

    risk avoidance loss control risk retention risk transfer

These techniques work for pure risks (chance of loss but no chance of gain) but not speculative risks (chances of gain or loss, as with stock market). Insurance reduces uncertainty about nonspeculative financial losses. There are requirements for insurable risks.

elimination of risk at any cost (e.g., drop a hazardous product) most aggressive and effective … but not practical eg, staying in bed all day to avoid risk of injury or death loss prevention: reduce frequency of loss usually impossible or impractical (e.g., to maintain income —> insurance or adopt a healthier lifestyle loss reduction: reduce the severity and financial impact eg, upon disability —> physical rehabilitation, crosstrain a backup safety measures, pooling, segregating (e.g., key employees travel separately), diversifying (not imperiling group by one member’s actions) noninsurance insurance

ANDREW S. FASTOW

2002-02-10 21:51:35 by ANDREWSFASTOW

When Andrew S. Fastow, the 37-year-old CFO of Enron Corp., boasts that 'our story is one of a kind,' he's not kidding. In just 14 years, Enron has grown from a heavily regulated domestic natural-gas pipeline business to a fully integrated global energy company with thriving activities in natural gas, electricity, infrastructure development, marketing and trading, energy financing, and risk management. And much of that growth has been fueled by unique financing techniques pioneered by Fastow.
'When I came here in 1990, Enron was a company with a $3.5 billion market capitalization,' says Fastow

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