The AMA Handbook of Financial Risk Management

Every financial investment decision your organization makes involves the concept of risk. How much profit needs to be returned on an investment to justify the amount of exposure that comes with it? Do you have a proven market and a competitive product? How large is the risk compared to your current resources? Can you afford the loss you might take? And have you considered the changes that might occur—from the cost of doing business to the state of the marketplace, the economy, and even the environment—that might take place and affect the outcome?

But managing risk isn’t just about the exposures your company may be open to—it’s also about opportunity. Yes, you can lose money with every financial decision. But with the proper risk management systems in place, you can also pursue success at higher degrees than you’ve ever imagined.

The AMA Handbook of Financial Risk Management provides the tools for dealing with the most important areas of financial decision making, equipping you with models that allow you to determine each new step in your organization’s future. The book provides clear explanations, straightforward guidance, and indispensable tools for evaluating risks that simply should not be ignored, including:

• Investment Risk, in which you may fail to earn a return or lose the invested capital

• Liquidity Risk, opened up by the fluctuating value of your securities or other assets

• Cash Flow Risk, that develops from opera­tions when you fail to manage seasonal or other variations

• Capital Structure Risk, when you borrow too much or fail to borrow to seize opportunities

• Budgeting Risk, when you fail to support goals and strategic initiatives with the resources to be successful

• Information Technology Risk, wherein failing to keep up with new developments can leave you open to competitors taking over your markets

• Valuation Risk, buying or selling assets without realizing their real worth

• And many more

Examining both the upside and the possible downside to every conceivable factor of your business, The AMA Handbook of Financial Risk Management is an indispensable resource that provides you with the philosophical and analytical framework you need to make the right decisions for your organization, every time.

JOHN J. HAMPTON is a professor of business at St. Peter’s College, a principal in the Princeton Consulting Group, and former executive director of the Risk and Insurance Management Society (RIMS). He is the author of Fundamentals of Enterprise Risk Management.

If you’re involved in the financial management of your organization, you know that every decision you make involves taking careful consideration of what factors are at stake, and protecting your bottom line.In short . . . managing risk.

Proper risk management entails knowing when to go after opportunities that can open up new realms of profit for your business . . . but if you fail to account for the possible, often hidden, pitfalls that can accompany each decision, the consequences could be tremendous.

Filled with strategies, principles, and measurement techniques, this book provides you with the tools you need for dealing with the most important areas of financial decision making. You’ll learn how to reduce a complex business environment into workable concepts and models, and quantify an enormous, constantly changing playing field in a way that allows you to understand and predict possible outcomes and determine how your organization should proceed in any situation.

Providing both explanations and practical applications, the book shows you how to:

• Understand the interrelationship of risk and return

• Manage risks in capital investment decisions

• Categorize financial risks

• Analyze operating risks

• Reduce risks from cash flow and budget exposures

• Determine the value of common stock

• Optimize debt in the capital structure

This comprehensive guide gives you the essential tools and insights you need for managing risk in financial statements, profits, cash flows, capital investments, value of the firm, and capital structure management. The book provides definitions of key terms, examines all the major ideas and concepts necessary to proper financial risk management, and provides step-by-step directions for determining risk and applying proven techniques to achieve favorable outcomes in any given situation. Packed with examples and “how-to” analyses, each chapter contains financial models you can use to make sense of the numbers and provide a framework for making smart decisions.

Authoritative, comprehensive, and clear, The AMA Handbook of Financial Risk Management is the one book that those who make organizational financial decisions should have on their bookshelves.