Talk:Financial risk management

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Confusing mix of the two different concepts

I teach this topic at the university level in a finance department. Please keep the Finance category as this topic is a mixture of both management and finance 18:13, 6 Mar 2005 (UTC)

Is this about managing financial risk, or managing risk using financial instruments? The article is about the latter, but I more associate the term with the former.. - DocendoDiscimus 08:03, 30 September 2007 (UTC)[reply]

Very good question indeed. The article is a little messy. It talks about shareholders but also about the Basel Accord. Those two are not directly linked. Managing risks inside a company is one thing, the Basel Accord is something else. Managing financial risks is a broad topic which may include how to manage risk using financial instruments but also how to use early warning systems and credit rating models. Also, it is one thing for a company to manage whatever financial risks it encounters through its daily operations, it is another thing to discuss how banks avoid taking on too much risk. The latter affects not only the bank itself but the entire economy since a collapse of one bank may trigger a domino effect that could (and have) result in a total collapse of the financial sector. And such collapses have far more serious consequences for the entire economy.

Maybe it would be a good idea to divide the article in two parts so that the difference becomes completely clear to the reader. MartinDK 17:34, 7 November 2006 (UTC)[reply]

— [additional comment] I agree that there is a confusion between "management" of financial risk itself (including the investment/financing decision-making process influenced by financial risk considerations) and the fact of doing this by using hedging tools, which is very restricting. Risk Management departments in banks are not at all limited to hedging and analysis of hedging strategies. Therefore I strongly recommend to adjust the content to be more consistent with the paragraph on Basel rules, which define how banks do operate in that perspective. The same can certainly be done having non-financial corporations as a focus.

Confusing mix of the two different concepts

See also