Notes on Advanced Corporate Financial Risk Management

The term risk management can mean different things to different people. In the last few decades, with the rise of financial engineering, the term risk management has become strongly associated with the derivatives trading desks of investment banking houses and hedge funds. In a few commodity industries certain firms have developed profitable trading operations built on the same principles. In non-financial corporations, risk management evokes an image of the treasury office buying or selling foreign currency futures to lock in the dollar value of foreign product sales. There is also an entirely distinct discipline that goes by the same label, risk management, and that is involved in identifying and limiting the probability of calamatous events, such as plant explosions or the theft of corporate secrets or the loss of key personnel. Insurance companies both cover and help to manage and minimize these sorts of risks.