Risk and Corporate Financial Strategy: Case Studies

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Risk and Corporate Financial Strategy The relevance of sound risk management cannot be overstated when it comes to the effective implementation of corporate strategy. This text concerns itself with the impact of risks on corporate financial strategy. Some of the risks that will be highlighted in this case include but they are not limited to reinvestment risk, default risk, political risk, interest rate risk, etc. From the onset, it is important to note that risk is part and parcel of every business entity's corporate strategy. For this reason, in seeking to develop the corporate financial strategy of their firms, managers must interrogate the inherent risks. One of the risks that could have an impact on the corporate financial strategy of an entity is business risk which Bender and Ward (2012) define as "the inherent risk associated with the underlying nature of the particular business and the specific competitive strategy that is being implemented" (p.51). Business risks could arise from events that take place inside or outside the organization. An entity with a significantly high business risk according to Bender and Ward (2012) must not "adopt a financial strategy that involves high financial risk" (p.51). Yet another risk which could have an impact on an entity's corporate financial strategy is credit risk. For most businesses, this particular risk arises in those instances whereby a client fails to satisfy its contractual obligations. Mostly, businesses find
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