Question

“Does Enterprise Risk Management Increase Firm Value?” Discuss the above statement, explaining the relevant theories.

“Does Enterprise Risk Management Increase Firm Value?”

Discuss the above statement, explaining the relevant theories.

Homework Answers

Answer #1

ANS: Enterprise Risk Management (ERM) is a plan based business strategy that aims to identify & assess the disaster that may interfere the organisational operations & objectives.

ERM is an extension of traditional risk management as ERM involves managing all the risk affecting the organisational goals & objectives. ERM can improve the focus of directors & executives by providing data that enables better risk mitigation decisions. Moreover Risk management provides insight into insurance & allow the company to better focus on its business strategies.

Yes, Enterprise Risk Management Increase Firm Value because of the following reasons:-

  • It allow coporate to use their debt
  • Maintain their optimal capital budget over a period of time
  • It avoid the cost associated to the financial distress
  • Optimum comparative advantages in hedging
  • Reduces tax from fluctuating earnings
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