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Essentials of Financial Risk Management

Down-to-earth guide to a complex topic.

Companies spend significant time producing forecasts of their sales and cash flows, yet often completely overlook their objectives for risk management. As a result, financial managers may make important decisions without a clear strategic directive from the firm. Essentials of Financial Risk Management by Karen Horcher, an experienced financial consultant and author of several financial risk management titles, is a very readable primer on navigating and sorting out what you need to know to identify the financial risks you're exposed to, and ways to shield your company if they occur. These risks can range from the effects of a stock market crash, trade imbalances, and the fallout from the failure of a key supplier to a confluence of several factors. The list goes on.

Considering the complexity of this topic, the author's clear style makes this material quite accessible even for those without an extensive financial background. The book first describes in general the various factors and issues to consider in managing financial risk, and then elaborates in detail on the various types of financial risks. Entire chapters discuss interest rate risk, foreign exchange risk, credit risk, and operational risk. The book ends with guidance on how to set up a risk management program and identify and measure a company's risks, as well as guidance on how to hedge different types of risk. The final chapter discusses the growing interconnectivity of the global financial system and the role it plays in risk management.