Financial Risk Management
An Analysis of Factors Affecting Corporate Risk Management with Special Reference to Power Finance Corporation

Article Details
Pub. Date : June, 2020
Product Name : The IUP Journal of Financial Risk Management
Product Type : Article
Product Code : IJFRM20620
Author Name : Ritu Wadhwa
Availability : YES
Subject/Domain : Finance Management
Download Format : PDF Format
No. of Pages : 33

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Abstract

Enterprise Risk Management (ERM) or Corporate Risk Management (CRM) is a concept which has been recently introduced. The approach has already been gregariously adapted by companies, banks, and financial and non-financial institutions to create a risk cover against the turbulences of tomorrow. The ability to manage risks across geographies, products, asset classes, customer segments and functional departments is of prime importance. Any failure to keep a check on these risks can lead to a serious damage to the continuity of the business. Power Finance Corporation (PFC) has identified the top 21 risks in its external and internal environment. Out of these 21 risks, 8 are quantifiable and 13 are non-quantifiable risks. The company has in place a vigilant committee consisting of professional and experienced people to consistently monitor the risk policies and make sure that the policies are revised to match the changing face of the power sector. The present study focuses on the effectiveness of ERM policies in the context of PFC. The various risks associated with PFC are credit risk, liquidity risk, market risk, operational risk, exchange rate risk on external borrowings, legal risk, risks due to change in prevailing statutes and interest rate risk associated with floating rate of interest.


Description

The changing and dynamic face of financial markets, coupled with increasing complexity, competitiveness and global integration, has rendered risk management a crucial activity in financial institutions. The concept of Enterprise Risk Management (ERM) has no standard policies. Thus, formulation and application of policies are internal to each organization. In the current scenario, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission is a joint initiative of five private sector organizations, namely:


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