Risk and Capital Management in Non-Financial Companies
The objective of this paper is to provide insights into the financial strategies of non-financial companies in so far as these strategies relate to risk management and capital structure. Section 2 puts forward some reasons for why the approach to risk and capital management in non-financial companies differs from that in financial institutions. This is followed in Section 3 by an overview of the principal financial strategy issues faced by non-financial companies, especially in the context of shareholder wealth maximisation. Section 4 outlines the principles underlying the concept of shareholder value and explains how these principles relate to risk and capital management strategies. The type of factors that need to be taken into account when determining value maximising risk and capital management strategies, as well as the link between these strategies and management incentive systems, are also considered. The final sections consider some implications for the role of the finance function in a non-financial company.
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