Navigating the Risks: A Systematic Literature Review of Financial Risk Management Practices in Venture Capital

Zufrial Aristama (), Afriska Yuni Anggraini and Ika Putera Waspada
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Zufrial Aristama: Universitas Pendidikan Indonesia
Afriska Yuni Anggraini: Universitas Pendidikan Indonesia
Ika Putera Waspada: Universitas Pendidikan Indonesia

A chapter in Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024), 2025, pp 410-417 from Springer

Abstract: Abstract This systematic literature review examines financial risk management practices within the venture capital (VC) industry, comprehensively assessing strategies and tools to mitigate investment risks. The study seeks to answer the question: How do venture capital firms manage financial risks, and what are the most effective strategies and tools used to address these risks? Through a structured SLR methodology, this review analyzed scholarly articles published between 2013 and 2023, highlighting the primary risk management strategies employed by VC firms: staged financing, financial contracting, active governance, and diversification. Staged financing enables VCs to align capital disbursements with company milestones, reducing exposure, while financial contracting, including convertible securities, aligns investor and entrepreneur interests. Active governance practices like board participation allow VCs to maintain oversight, and diversification spreads risk across sectors or stages. Despite the critical role of financial risk management in venture capital, there is a noticeable gap in academic reviews that holistically address these practices. This study consolidates existing literature, identifies key trends, and pinpoints areas needing further exploration, offering a nuanced understanding of financial risk management within venture capital and guiding future research and practice.

Keywords: Financial Risk Management; Risk Mitigation; Risk Strategies; Risk Tools; Venture Capital (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:advbcp:978-94-6463-817-2_50

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DOI: 10.2991/978-94-6463-817-2_50

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