1
IEH6N3 Manajemen Risiko dan Portofolio
FINANCIAL RISK
MANAGEMENT
Dr. Ir. Endang Chumaidiyah, S.T, M.T
S2 Teknik Industri – Fakultas Rekayasa Industri
Outline 2
01
Definition of Financial Risk
02
Scope of Financial Risk
03
Benefits of Financial Risk
04
Implementation of financial Risk
05
Liquidity Risk
06
Credit RIsk
07
Borrowing
08
Currency
09
Funding
10
Foreign Investmen
11
Derivatives
3
Definition of Financial Risk
Financial risk is the exposure to adverse events that
erode profitability and in extreme circumstances
bring about business collapse
(Chapman, 2006)
3
4
Scope of Financial Risk
Liquidity Risk
Credit Risk
Interest Rate
Inflation
Currency
Funding Risk
Foreign Investment Risk
Derivatives Risk
System Risk
Outsourcing Risk
4
5
Benefit of Financial Risk
Improve Financial Planning and Management
Facilitates more robust investment decisions
Informs hedging decisions
Encourages the development of constraint monitoring
Encourages the practice of due diligence
5
6
Implementation of Financial Risk
Management
The development of robust financial systems and internal controls
The development of concise, lucid reporting tools
The preparation of a cash budget plan, to diminish the likelihood of the threat of liquidity
risk
Securing credit insurance to cover non-payment of goods or services/bad debt.
Carrying out comprehensive due diligence on counterparties whose default could
seriously harm the business
Monitoring predicted changes in interest rates, so that business activity can be modified to
diminish its effect.
Carrying out a robust assessment of planned investments, using tried and tested
techniques.
6
7
LIQUIDITY RISK
“the risk that a business will be unable to obtain funds to meet its
obligations as they fall due either by increasing liabilities or by
converting assets into money without loss of value”
Current and Quick Ratios Mitigation of Liquidity Risk :
• Prepare a Cash Budget
7
8
Credit Risk
“the risk that customers default, that is fail to comply with their obligations to
service debt”
Default Risk Exposure Risk Recovery Risk Mitigation
missing a uncertainty uncertainty over • Credit
payment surrounding the the likely recovery Insurance
obligation, payment of future of outstanding • Counterparty
breaking a amounts amounts due Risk
covenant, entering • Due Dilligence
into a legal
procedure, or
economic default
8
9
Borrowing
Amount
Term
Forecast
Inflation
Risk
Opportunity Cost
Market
9
10
Currency Risk
There is always a risk that the expected cash flows
from overseas investments will be adversely
affected by fluctuations in exchange rates
10
11
Funding Risk
Businesses that have secured loans may have had
to offer security to the lender by pledging a fixed
charge on assets held by the company or a floating
charge, which “hovers” over the whole of the
company’s assets. The riskiness of loan capital (for
lenders) can be measured in terms of default risk
11
12
Foreign Investment Risk
1 Country Risk
2 Environment Risk
Risks arise from the geographical distance There will most probably be different laws,
of the market, which can increase both the working practices, cultural and ethical
cost and time associated with debt norms and taxation regimes, which may
collection have a profound effect on the viability of
an investment proposition.
13
Derrivatives
A derivative is a contract between two or more parties whose value is based on an agreed-
upon underlying financial asset (like a security) or set of assets (like an index). Common
underlying instruments include bonds, commodities, currencies, interest rates, market indexes,
and stocks.
1 Exchange trade derivative
2 Over the counter derivatives
An exchange traded derivative is a Over-the-counter (OTC) derivatives
financial instrument that trades on a are contracts written to meet the
regulated exchange and whose specific needs of individual clients,
value is based on the value of such as businesses, banks or
another asset governments