Question

Explain how managing risks can  Maximize Shareholder Value

Answer 1

ANS

Managing the risks in the organization involves the identification of the risks that are involved and that could occur in the coming future and eleminating those risks from the organization. Shareholder's value is increased when the value of the stocks of the firm is increased. The value of the stocks is subject to the profits earned by the firm, market fluctuation in which the firm is operating, the image of the firm in the society and the challanges faced by the firm. If the firm conducts risk management effectively then the value of the shares will rise as the firm will be able to foresee the challanges beforehand and which will further increase the share value. It improves the capital returns of the organization and also improves the capital allocation which initiates in maximizing shareholder value.