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Considerations on the financial risks in shipping industry

Ghiorghe Batrinca and Burca Ana-Maria
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Burca Ana-Maria: Constanta Maritime University

Constanta Maritime University Annals, 2011, vol. 15, issue 1, 25-28

Abstract: In general, business-risk management is concerned with the possible decline in the value of a shipping company due to an event, or a change, in any of the factors that affect its value. Fundamentally, the value of a company depends on the expected net cash flows from its operations. Therefore, any factor that may have a negative impact on the expected net cash flows is identified as a risk. Due to the capital-intensive nature of shipping and the fact that most vessel acquisitions are financed through term loans priced on a floating-rate basis, unanticipated changes in interest rates may have an adverse impact on the assets and liabilities of a company and can lead to severe liquidity problems and cash-flow mismatch, especially given the business-cycle dynamics of shipping markets. Consequently, interest-rate risk measurement and mitigation is an indispensable aspect of shipping risk management

JEL-codes: R0 (search for similar items in EconPapers)
Date: 2011
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