Why incorporate financial risk management into your firm's strategic planning?  To save money.

Lower transaction costs: Prudent risk management which is consistent with the best practices that have evolved over the past twenty years reduces the variability of a company's income, the likelihood of future financial distress and the credit spreads it must pay to borrow money and use derivatives.

Increase sales: In improving the firm's credit status, the company becomes a preferred supplier to its customers because of its stability.

Make better investment decisions: Financial stability means lower debt financing costs.  And lower debt financing costs increase operational flexibility.

Mitigate poor diversification: Risk management may be most important for small- and medium-sized companies.  In absolute terms, they may not have as much financial price risk as the large multinationals.  But they also do not have the diversification of exposure that naturally reduces this risk.  Nor do they often have the diversification of ownership that characterizes a well-capitalized firm. 

Raise the share price: The enterprise that reports its risk and its sensible risk management philosophy as publicly and explicitly as possible will be rewarded by the marketplace for its confidence-building leadership and the stability and scale of the long-term growth of its earnings.

Obtain a competitive advantage: A company that has a sophisticated and successful hedging program in place is more likely to avoid opportunity losses over time, giving it a competitive advantage over its competitors who do not treat risk management as a strategic task.

The G30 Think Tank

The G30 is a Think Tank comprised of financial risk management experts who have synthesized best practices for financial risk management from the experience of some of the leading financial institutions. 

Victory can evaluate the extent of your company's compliance with these rules.  Once Victory has completed a Best Practices Risk Assessment, we will know exactly which areas require improvement. 

The Assessment provides a qualitative benchmark for performance measurement that compliments the quantitative benchmarks typically used to judge the efficacy of a risk management program.

Financial Risk Management Resources

Check out the readings on financial risk management we recommend.  You can also take a look at the financial risk management links we suggest and articles that we have written in the media.