fm23 8 - e. What are the three steps of corporate risk...

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Mini Case: 23 - 9 e. What are the three steps of corporate risk management? Answer: The three steps are: Identify the risks faced by the firm; Measure the potential impact of the risks identified; and Decide how each relevant risk should be handled. f. What are some actions that companies can take to minimize or reduce risk exposures? Answer: There are several actions that companies can take to minimize or reduce their risk exposure. First, companies can transfer risk to an insurance company by paying periodic premiums. Second, companies can transfer functions that produce risk to third parties, such as eliminating risks associated with transportation by contracting with a trucking company. Third, purchase derivatives contracts to reduce input and financial risk. Fourth, companies can take actions to reduce the probability of occurrence of an adverse event, such as replacing old wiring to reduce the possibility of fire. Fifth, actions can be taken to reduce the magnitude of the loss associated with
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This note was uploaded on 07/13/2011 for the course FIN 4414 taught by Professor Staff during the Spring '08 term at University of Florida.

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