Topic 17, Exercise 2Real OptionsA recent article written by Sumit Paul-Choudhury entitled, “Real Options and StrategicBusiness Risk,”examines how the changes in real options were affecting the role of risk managers in the firm. The author makes the point that investors are searching for firms that will do the best job of enterprise risk management. Developments in the concepts of real options are allowing firms to better manage their overall risk. After reading this article, answer the following questions:1. Corporation risk officers are now more involved in strategic management. The author explains that this change is due to the ability to control or manage business risk. Explain.The original role of the risk manager was limited to a watchdog for potentially serious situations and an insurance manager. Developments in the insurance and derivative markets have made it possible to manage or control business risk, and this has changed the role of the risk manager to become more involved with strategic management.
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