Factors that contribute to the emergence of Internal financial risks of the enterprise

Group factors: Industrial and commercial

● low efficiency of fixed assets;
● poorly chosen or poorly diversified assortment structure
● high proportion of fixed costs;
● high level of material and the complexity of the product;
● excessive amount of insurance and seasonal inventory;
● inefficient pricing;
● inefficient production management and marketing policy.

Group factors: Investment

● increase in terms of construction investment projects;
● significant overruns investment resources;
● actual deviation from the planned volume of investment income
● long-term return on investment;
● awkwardly shaped stock portfolio;
● inefficient investment management.

Group factors: Financial

● inefficient capital structure, excessive borrowing;
● High average cost of capital;
● lack of long-term sources of funding assets;
● low reversibility of working capital;
● insufficient liquidity of assets;
● inflated number of receivables;
● aggressive dividend policy;
● inefficient investment management in general.

Depending on the size of possible financial losses, there are four
key areas of financial risk:

risk-free zone: very little risk of financial loss is little, guaranteed financial result in the amount of estimated profit;
zone of acceptable risk: Medium, possible financial loss in the amount of estimated profit;
● critical area of ​​risk: high potential financial losses amounting to estimated gross revenue;
zone catastrophic risk: very high, possible financial loss volume amount of equity capital of the company. Select individual areas of financial risk, depending on the amount of expected losses and factors that cause them, should be the basis for the formation of management financial risk management company. Because the company can not practically influence external risks, the focus should be given to internal mechanisms to neutralize risks, including:
diversification, which is the process of distribution of funds invested between real investment, not directly linked. Diversification is carried out to reduce the level of risk and loss of income. This method avoids part of the financial risk based on distribution equity between the various activities (eg, purchase investor shares five different corporations in lieu of shares of one company it increases the likelihood of the average income five times and, therefore, five times reduces the risk). Diversification involves more information on options and expected results. As a result, there opportunity to make more accurate choices and reduce the risk of financial loss the results of the company:
limitation – it set a limit, that limit the amounts of costs, sales, credit and so on. Limitation of use to reduce financial risk credit and investment activity;
self-creation is a decentralized form of natural and Cash funds directly to insurance companies, particularly those whose activity at risk. The main objective is to self operational overcome temporary difficulties in the financial and commercial activities;
hedging enables to reduce the risk by entering that Agreement. Often used as a hedging vehicle insurance
cost of goods or income and foreign exchange risks of the enterprise. Hedging is a system of economic relations among financial market associated with a reduction in credit and price risk that arises from simultaneous and opposite direction trade agreements and derivatives market market real goods.

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