Thorough Financial Analysis for a better Risk Management

Authors

  • He Youshi Supervisor, Management Department
  • Zead Qachln PhD in Management Science and Engineering
  • Tan Zhongming Director, Finance Department

Keywords:

Financial analysis, risk management, internal financial risk, investment firms, risk factors.

Abstract

In recent years, the significance of financial risk management has been progressively highlighted by the organizations, especially after the financial crisis of 2007-08.  Due to inadequate information or negligence in identifying the risk, several investment companies face higher risks associated with their investment, which leads to financial distress or bankruptcy. This article aims towards finding measures for the identification, evaluation, analysis, and monitoring of risks that can be implemented by the various firms to cope up with their internal financial risks. It is because to generate higher returns on investment it is important for the organization to understand the risks associated with the investment and manage them accordingly. Therefore, to manage the financial risks associated with the investment, the organization needs to go through the risk management process which involves risk identification, risk analysis and evaluation, risk response and risk monitoring. Moreover, we will be discussing on the three categories of risk named as profitability, solvency and liquidity, which are one of the most important internal financial risks that medium sized investment company experiences.

References

[1] Alexander, C. Market Models: A Guide to Financial Data Analysis, John Wileyand Sons, 2010.
[2] S. Poon, M. Rockinger and J. Tawn. "Extreme Value Dependence in Financial Markets: Diagnostics, Models, and Financial Implications." Review of Financial Studies, vol.17, pp. 581-610, 2003.
[3] K. Nikolaou(200). "Funding Liquidity Risk: Definition and Measurement", SSRN Electronic Journal. [On-line]. 33(1), pp. 35-48. Available: https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1008.pdf [Jun. 4, 2017].
[4] S. Myers and N. Majluf. "Corporate financing and investment decisions when firms have information that investors do not have." Journal of Financial Economics, vol. 13, pp. 187-221, 1984.
[5] J. Nguyen. "The relationship between net interest margin and noninterest income using a system estimation approach." Journal of Banking & Finance, vol. 36, pp. 2429-2437, 2012.
[6] R.F. Devellis. “Scale development: theory and application”, Applied Research Methods Service, Vol. 26. Newbury Park, CA: Sage Publications, 2011, pp.67-72.
[7] S. Oliner and G. Rudebusch. "Sources of the Financing Hierarchy for Business Investment." The Review of Economics and Statistics, vol. 74, pp. 643, 1992.
[8] H. Schaller. "A Re-Examination of the Q Theory of Investment Using U.S. Firm Data", Journal of Applied Econometrics, vol. 5, pp. 309-313, 2010.
[9] H. Schaller. "A Re-Examination of the Q Theory of Investment Using U.S. Firm Data", Journal of Applied Econometrics, vol. 5, pp. 314-317, 2010.
[10] H. Schaller. "A Re-Examination of the Q Theory of Investment Using U.S. Firm Data", Journal of Applied Econometrics, vol. 5, pp. 318- 325, 2010.
[11] R. Bettis and V. Mahajan. "Risk/Return Performance of Diversified Firms." Management Science, vol. 31, pp. 785-799, 1985.
[12] J. Butler and B. Schachter. "The Investment Decision: Estimation Risk and Risk Adjusted Discount Rates." Financial Management, vol. 18, pp. 13, 1989.

Downloads

Published

2017-07-31

How to Cite

Youshi, H., Qachln, Z., & Zhongming, T. (2017). Thorough Financial Analysis for a better Risk Management. American Scientific Research Journal for Engineering, Technology, and Sciences, 29(1), 379–387. Retrieved from https://asrjetsjournal.org/index.php/American_Scientific_Journal/article/view/3234

Issue

Section

Articles