ERM concepts and Risk categorisation [21]

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Bullet points include: Risk benefits or harms different stakeholders differently Traders may benefit more from upside risk than suffer from downside risk Equity-holders may have limited liability Debt holders and regulators/governments/industry wide protection arrangements may lose if firm suffers large losses Often focus is on principals trying to control agents (‘agency problems’) Non-academic way of describing these issues is corporate governance Cadbury report: “corporate governance is the system by which businesses are directed and controlled” ERM is part of this framework, e.g. Walker Review

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