Risk Management Issues From Electricity Industry

Systematic risk or market risk is the risk that affects a large number of assets. Examples of systematic risk are inflation or increasing the interest rate, or any uncertainties in the economy but not the company 's performance. Unsystematic risk is the risk that mainly associated with specific companies or may be some competitors and suppliers. The systematic risk affects the whole market and cannot be controlled by investors. Unsystematic risk however affects the company and is controlled by the company 's performance. When investors invest money into a company they must research all aspects of that company so they are aware of the unsystematic risks they may encounter.

2. Some risks that are common between domestic and international funds are: losing money and management risk. Any investment has some type of risk. Losing money is the first risk that every investment has whether it is domestic or international. Management risk is the bad management decisions that a company makes. Some unique risks that only international funding has are: economic risk, country/regional risk, and currency risk. Currency risk is the chance that the value of a   foreign investment, measured in U.S. dollars, will decrease because of unfavorable changes in the currency exchange rates. Economic risk is the stability of a country’s economic. Country/regional risk is political, financial troubles, and natural disasters that will affect the value of securities issued by companies in foreign countries or regions.

The impact of the risks on global business it is dramatic in our days, changing the entire look of the industries and financial services. Some risks could be anticipated and identified but some could not. Companies now are using more and more key steps and principles to better manage the risks by;

Financial risk is the risk a corporation faces due to its exposure to market factors such as interest rates, foreign exchange rates, commodities and stock prices. Financial risks for the most part, can be hedged due to the existence of large, efficient markets through which these risks can be transferred. This is unlike operating risk, which is associated with more manufacturing and marketing activities. Operating risk cannot be hedged because these risks are not traded.

Being risk averse in an industry plagued with risk is a difficult task. However, identifying and managing risk is crucial in the capital intensive energy industry. Effective risk management leads to increased revenues, decreased costs and capital, and can propel a business to success. The information outlined will offer a discussion of how to identify and mange areas of risk and additionally, detail a process flow for successful implementation.

Today, risks involve a lot of worries about being sued, as well as legal and regulatory environment risks. The most successful business is the most sued. Personal experience and the experience of others is a good measure to evaluate for risks and can be used as a risk model. Measuring risk from experience also tells what the damage can be if the situation arises. "Risk management is important to ensure that a methodical risk approach is used to identify assets to be protected, the threats and their impact on those assets, and the controls to be used

Investors and financial scholars describe the systematic risk – also known and non-diversifiable risk- as the component of an investment that is totally related to the return from the market (Hull, 2015, p. 8). In other words, it depends on the conditions of the market, which is affected by the inflation rate, exchange rate, interest rate and economy growth rate (Atrill, 2014, p. 215).

Enterprise risk management (ERM) is a relatively new discipline that focuses on identifying, analyzing, monitoring, and controlling all major risk classes (e.g., credit, market, liquidity, operational risk classes). Operational risk management (ORM) is a subset of ERM that focuses on identifying, analyzing, monitoring, and controlling operational risk. The purpose of this paper is to explain what enterprise risk management is and how operational risk management fits into the ERM framework. In our conclusion, we discuss what is likely to happen in the ERM / ORM environment over the next 5 years. Introduction As

When making investment decisions it is important to quantify the relationship between potential returns and the underlying risks. In this situation, the client is considering making an equity investment in Country X which would expose the client to Equity, Sovereign, and Currency Risk. Equity Risk is the risk of investing in equity markets as opposed to risk-free options. Sovereign Risk is the risk that Country X will default on its debt. Currency Risk is the risk of adverse exchange rate shifts; this is primarily the relationship between inflation expectations in Country X and the US.

The outcomes are thrown open to uncertainty. In general, when we talk about risk, we focus on financial risk. In financial terms, it is the risk that a company or individual could lose some or all of the original investment, possibly resulting in inadequate cash flow to meet financial obligations. All wise investments follow risk consideration. To be successful, every investor must be able to identify and understand the types of risk they face across their entire portfolio.

The research takes a case study approach. The case study analysis dwelt on risk management by Contractors who work on energy and utility construction projects, including strategies and supporting structures for managing risks, complete with an analysis of how these strategies and structures are implemented and supported by the Contractors resources base. The researcher specifically chose utility contractors for this study as the Energy and Utilities sector play an indispensable role in the global economy and in the UK, industry employs around 2% of the UK workforce (AGCAS, 2012). Moreover, the UK government identified the Utilities companies as companies that are heavily involved in risky incidents affecting their sector thus playing a crucial role in the preparation and planning for emergencies responsibilities (UK Government, 2013). According to Yip (2003) construction is risky as it almost always certainly involves loss of time and money. Above all, any denial of service during outage result in impact on communities (Lindman, 2008) and utility services are no exception. Against this background, it could be argued that contractors working on construction projects undoubtedly play a significant role in managing risks in order to stay in business.

Risk management refers to the process involved in identifying, analyzing and acceptance or preventing of uncertainty in an investment decision making process (Dorfman, 2007). In most cases, risk management is carried out to control losses that may occur as a result of an event that may occur in a business. It is good to note that failure by a business to take adequate risk management can result to severe loss or consequences, not only for the business, but also for individuals. In simple terms, this is a two step process that involves determining the risks that may arise and the dealing with the risks in a way that is most effective for your business investment goals (Hubbard, 2009). This article provides an example of how failure to put the right risk management strategies can lead to massive loss in a business. The article uses Spear Investment Company located in New York as a perfect example of a business that failed to apply risk management properly. The paper will also look at how the company management would have acted before to avert the consequences.

The first category of financial risk is exchange risk. For BMW Group, the sale of vehicles outside the Eurozone gives rise to exchange risk because changes in exchange rates, especially between the US dollar, Chinese renminbi, British pound, Russian rouble, and

Economic Risk is another major factor to consider when determining the likelihood that a country should be invested in. Many of the items associated with Economic risk include exchange rate risk, inflation, GDP, and devaluation.

Financial risks would involve all those aspects which deal mainly with financial aspects of the bank. These can be further subdivided into Credit Risk and Market Risk. Both Credit and Market Risk may be further subdivided.