Risk Coursework Example | Topics and Well Written Essays - 500 words

Risk - Coursework Example tegies used by the corporate managers in relational to effective financial planning to meet organization needs regard the financing, capitalization, budgeting and risk management. The perception of various risk influence corporate financial strategies in order to minimize a risk and maximize returns. This document focuses on various types of risks facing businesses and their effects on corporate financial strategy. This is the uncertainty that the organization may obtain lower profits than anticipated in case of unforeseen events occurring. For example, when sales volumes declines, cost of inputs increases, economic climate or government regulations change they may result in loss instead of anticipated profits (Bender & Ward, 2012). In a case of high business risks, the corporates may finance business activities with capital bearing less debt ratio to ensure it can meet financial obligations whenever they are due. Credit risk is the risk that the borrower may fail to repay the borrowed amount and interest charges when they are due. Lenders may incur additional cost to insure their loan portfolios in order to minimize the loss or borrowers are required to use security or guarantees before they acquire the loan (Bender & Ward, 2012). This affects corporate financial strategy especially when the business does not have to tie capital in security assets. They may have to raise funds through other means other than by borrowing funds. This is the risk that arises due to fluctuation of interest payable to the stocks. It can affect corporate financial strategy whereby investors may refuse to commit buy stocks in a particular market due to fluctuations in interests for fear of losing the value of their invested stocks (Bender & Ward, 2012). These are risks investors face due to political instabilities in the countries of operations. It can affect corporate investment decisions whereby the businesses if the managers cannot take enjoy opportunities available in certain