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On the other hand, some investments in physical capital can reduce risk and the value of the risk reduction can be estimated with financial calculation methods, just as market risk in financial markets is estimated. For example energy efficiency investments, in addition to reducing fuel costs, reduce exposure fuel price risk. As less fuel is ...
There have been several studies of the scale and complexity of this market for example in the USA. [ 1 ] [ 2 ] Commodity chemicals are a sub-sector of the chemical industry (other sub sectors are fine chemicals , specialty chemicals , inorganic chemicals , petrochemicals , pharmaceuticals , renewable energy (e.g. biofuels ) and materials (e.g ...
Business risk implies uncertainty in profits or danger of loss and the events that could pose a risk due to some unforeseen events in future, which causes business to fail. [ 1 ] [ 2 ] [ 3 ] For example, a company may face different risks in production, risks due to irregular supply of raw materials , machinery breakdown, labor unrest, etc.
Commodity risk refers to the uncertainties of future market values and of the size of the future income, caused by the fluctuation in the prices of commodities. [1] These commodities may be grains , metals , gas , electricity etc.
Non-financial firms focus on business risk more generally, overlapping enterprise risk management: i.e. those events and occurrences which could negatively impact cash flow or profitability, and hence result in a loss of business value or a decline in share price.
Various strategies have been developed using, for example, weather derivatives [11] and electricity options. [10] At the same time, producers and their customers regularly hedge against price risk using [12] available commodity derivatives. Commodity traders will similarly have hedges in place for the resultant market and volatility risk.
An example of speculative risk is purchasing stocks, the future of the stock's price is uncertain, and both a gain or loss could occur depending on whether if the stock price rises or decreases. [7] Currency risk is when exchange rates changes will affect the profitability of when one is committed to it and the time when it is carried out. [ 8 ]
Cost escalation can be defined as changes in the cost or price of specific goods or services in a given economy over a period. This is similar to the concepts of inflation and deflation except that escalation is specific to an item or class of items (not as general in nature), it is often not primarily driven by changes in the money supply, and it tends to be less sustained.