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Risk Management

Risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk. Typical risks that any corporate faces can be summarized by the graphic below

Risk Management

Risk management refers to the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce/curb the risk. Typical risks that any corporate faces can be summarized by the graphic below

Risk Management

 

Types of corporate risks

As a financial advisor, Plus Capital would assist your organization handle risk management in the financial domain, which typically involves

  1. Credit risk: Risk that a debtor is unable to pay his debts, risk of taking business exposure to any single industry or country, risk of dealing significantly with a single counterparty or group companies of a single counterparty
  2. Liquidity risk: How quickly or easily your investments or assets can be liquidated
  3. Market risk: Risk of loss from market price movements in different asset classes like equity, interest rate, currencies, commodities, etc.

Financial Risk management Process

The process we will follow to handle your company’s financial risk management would involve the following steps:

  1. Identification of the financial risks that the company is subject to, under the different areas as mentioned above
  2. Evaluation of the seriousness of every risk for the company and how any unforeseen event can affect bottom line for the company
  3. Charting out strategies to mitigate the risk after a deliberate evaluation of how much risk can be handled in house versus provided for by third party solutions
  4. Monitoring of the risk on a regular basis
  5. Periodic  review of the risk and the measures adopted to evaluate if any changes need to be implemented

Some of the different financial risks and why they occur

RiskImpactCause
Interest Rate Risk - DebtDebtChanges in interest rate environment
Interest Rate Risk - AssetInvestmentsChanges in interest rate environment
Investment Risk (Equities)InvestmentsChanges in investor sentiment
Credit Provider RiskDebtProvider rating downgrade
Renewal/Refinancing RiskDebtChanges in landing appetite
Operational RiskEBITDAVariability in operating performance
Basis RiskSwapsImperfect hedge
Remarketing/put riskDebtMarket conditions, Enhancer downgrade
Mark to Mark RiskSwapsChanges in interest rate environment
Counterparty downgrade RiskSwapsSwap Counterparty downgrade