Value-Based Corporate Risk Management

Werner Gleißner
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Werner Gleißner: RMCE RiskCon GmbH & Co. KG

A chapter in Risk Management, 2005, pp 479-494 from Springer

Abstract: Abstract Managing risks does not necessarily mean reducing risks but weighing up these risks against the profits and considering the impacts on the equity capital needed to cover the risk (and on the cost of capital). Risk analysis and risk aggregation are necessary tasks of a value-based management as they help to assess the well-funded goodwill of a company. An important widening can be made in taking into account the systematic as well as the idiosyncratic risks. In doing so, the management can quantify the effects of a risk reduction (e.g. by transferring it) on the value of a company. Alternatively to the Capital-Asset-Pricing-Model the capital costs in imperfect markets can be determined in dependence to the own capital funds needed, which is analyzed by the aggregation of all risks in the context of planning.

Keywords: Risk Management; Cash Flow; Equity Capital; Capital Asset Price Model; Free Cash Flow (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-540-26993-9_24

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DOI: 10.1007/3-540-26993-2_24

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