How to analyze financial risks in a sector during an international crisis
Sunday, 20 Sept 2020, 11:28
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Edited by Helene Viel, Monday, 21 Sept 2020, 10:17
There are different ways to analyze financial risks in a sector during an international crisis. Can an organization go through any hostile environment or can we set up or manage an organization anywhere? We can analyze first macroeconomics evolution or begin from the sector/organization we want to study.
Macroeconomics means analyzing demand, supply, market equilibrium, and change in equilibrium.
Beginning from the sector we want to study means that we study balance sheet, cash flow, financial frictions, currency exchange effects, investment, financial accelerator.
There are different ways to definite financial risk, we can use the helicopter view of risk, risk mapping enterprise risk management, for example. The helicopter view of risk method gives a good view of financial and non-financial risks.
How to analyze financial risks in a sector during an international crisis
There are different ways to analyze financial risks in a sector during an international crisis. Can an organization go through any hostile environment or can we set up or manage an organization anywhere? We can analyze first macroeconomics evolution or begin from the sector/organization we want to study.
Macroeconomics means analyzing demand, supply, market equilibrium, and change in equilibrium.
Beginning from the sector we want to study means that we study balance sheet, cash flow, financial frictions, currency exchange effects, investment, financial accelerator.
There are different ways to definite financial risk, we can use the helicopter view of risk, risk mapping enterprise risk management, for example. The helicopter view of risk method gives a good view of financial and non-financial risks.
Financial risks are:
- market (currency, interest rate, commodity price risks)
- credit
- liquidity
- pensions ones
- leverage
Non Financial risks are:
- legal
- reputation
- operational
- strategic
- business
- regulatory ones
Risk mapping is different. There are five steps:
- classification: decide how to organise the catalogue of risks
- identification: list of all relevant risks
- measurement: decide on measure to quantify the risk (e.g. VaR, PFE)
- assessment: assess the significance of each risk
- response: accept, reduce, transfer, eliminate or avoid the risk