Cash Flows Under Different Risk Management Decisions - Essay Example

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An essay "Cash Flows Under Different Risk Management Decisions" reports that risk is referred to as the probability of loss. Higher probability of loss leads to more risk. In other words, risk is associated with the potential to lose something which has some value. …
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Cash Flows Under Different Risk Management Decisions
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Download file to see previous pages A risk is involved because of the uncertainty is present in the future. Therefore, the risk can also be called as the uncertainty of the future events (Crouhy, 2000). It can be explained in a way that we are not aware of the unexpected circumstance, which may happen in the coming future. Despite the projections and planning, one cannot fight with the events which are out of the control of human beings. This can be explained with the example of common human being, who plans and takes decisions in his life with some expectations, which he believes will have more chances to occur in the future but if life does not move according to the expected circumstances so the person may face loss in his decision. Therefore, the chance of occurring unexpected circumstances is referred to as the risk of loss. The reason may be that the decisions may not move according to the plan (Hopkins, 2012). Risk can also be explained with the more specified example of financial planning of a person, who projects his cash flows that will occur in the future based on the potential for his career growth. If the result of the decision is in accordance with his plan then he will be able to enjoy profits otherwise loss (David, 2008).The job of any risk manager is to control the risk and identify more profitable option at the given level of risk. The risk level is determined using different risk-based components and the then financial engineering is used to evaluate the results of the risk-based decisions (McLucas, 2003). ...Download file to see next pagesRead More
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