Corporate Risk Management
Financial management revision article series
A firm with high total risk exposure is likely to face financial difficulties which tend to have a disrupting effect on the operations of the firm. A financial distress can lead to:
adverse incentives in the management and employees
weaken commitment of various stakeholders
impair the ability of the firm to avail its tax shelter.
Hence firms have to plan their risk levels, measure their risk levels and take actions to decrease their risk levels if necessary. Risk management process involves all these steps.
Prasanna Chandra, Financial Management, 5th Ed., Tata McGraw Hill, 2001
Brealey and Myers, Corporate Finance, Fifth Edition, Prentice Hall India, 2001