Core concepts
- 01Financial policy aligned with corporate strategy (growth, profitability, market position).
- 02Risk types: business, financial, operational, market, credit, liquidity, country.
- 03Risk management process: identify → assess → mitigate → monitor.
- 04Tools: hedging (forward, futures, options, swaps), insurance, diversification.
- 05VaR (Value at Risk): max expected loss at given confidence level over time horizon.
Flowchart
Enterprise Risk Management | Strategic <-> Financial Policy | Risk Types: Market, Credit, Liquidity, Operational | Tools: Hedging | Insurance | Diversification | Monitor (KRIs, dashboards)
Exam-critical pointers
- ⭐VaR limitations: assumes normal distribution; doesn't capture tail (use Expected Shortfall).
- ⭐COSO ERM framework — integrated approach with strategy, performance.
- ⭐Hedge ratio = correlation × (σ_spot / σ_futures).
- ⭐Distinguish hedging from speculation — intent and offset position.
Make it click