Experts, Do you have idea about definition of Cash-flow at risk. I consider it as tool used by nonfinancial firms or corporate finance. Cash flow refers to operational cash flow, and time horizon, in general, will be on quarterly, semi-annual, or annual basis. But some of my colleagues argue it should be on a daily basis, similiarly as VaR.
Any comments and ideas will be appreciated.
You need to be a member of Global Risk Community to add comments!
Dear GlobalRisk Community member, Our community’s mission is to foster business, networking and educational explorations among members. Learn from some of the top experts in the industry as they clearly explain how to approach the most important Risk management concepts. Check out their expert tips and use the link at the end of each article to navigate back to the website to leave your comment or ask a question. Some of the topics include: How do you Explain Risk Appetite? How to Prepare a…
Read more…I have just published a guide on PEPs screening requirements around the world and would like to know if anybody has any feedback on it? https://complyadvantage.com/blog/politically-exposed-persons-peps-screening-requirements-around-the-world/CA-PEP-Screening-Map-FINAL-V7 (1).jpg
Read more…We created a free presentation (attached), which discusses both global and organizational impacts of the COVID-19 pandemic, along with critical actions organizations should take immediately. This presentation introduces a framework that helps regions and organizations navigate a path to recovery via 9 potential scenarios. These scenarios capture outcomes related to GDP impact, public health response, and economic policies. The presentation also breaks down 6 immediate and critical actions…
Read more…Now that the updated COSO and ISO risk management standards emphasize a connection to enterprise objectives and decision making, does this mean ERM and GRC solutions focused on risk registers and regulatory compliance are missing the true value of risk management?Will current risk management solutions evolve to integrate more decision support functionality or will standalone prescriptive analytics and other technology solutions take a more prominent role in enabling risk-informed…
Read more…We have an interesting question from one of our members. "We usually perform OTC FX transactions with clients backed-to-back on the market (with Banks). Now we are going to perform a FX swap (i.e. Spot + forward) JPY/EUR for the Bank account for 1 week at the longest. The purpose is to get EUR place @ CB for LCR compliance purpose (no trading purposes). Bank's Management think that this should be considered as a trading position and therefore be classified within the Bank's trading book.…
Read more…The recent sudden crash of oil prices has had a major impact on the world economy, leading to many troubled faces in the international arena. The Russians fear the effects of yet another powerful hit on their economy, Venezuela seems to be considering default and the Americans are weary of the consequences for its young and emerging shale oil industry. And then you have the Middle East, where the smallest match is enough to ignite the largest fire. But are these worries really justified or…
Read more…The GlobalRisk Community is a thriving community of risk managers and associated service providers. Our purpose is to foster business, networking and educational explorations among members. Our goal is to be the worlds premier Risk forum and contribute to better understanding of the complex world of risk.
For companies wanting to create a greater visibility for their products and services among their prospects in the Risk market: Send your business partnership request by filling in the form here!
Replies
Cash-Flow at Risk --- This is absolutely a big deal for credit risk and it can be measured in many different ways.
Perhaps one of the more popular techniques is to track solvency ratios such as Altman Z-Scores and current ratios, measure the spreads between DPO (Days Purchase Outstanding) with DSO (Days Sales Outstanding).
These measures can be shown with confidence levels and they can be stress tested if need be. If you are interested, I also have a spread sheet template I can send to you that calculates these various measures of risk.
Hi,
In my opinion the typical VaR approach does not work in tracking potential cashflow risks, because the cycles are at least monthly or longer, there are no cash assets being monitored, and the losses are not observable.
Cashflow risks relate to 1) a gradual deterioration of debt collections 2) significant / sustained trading / operational losses that drain cash resources 3) capital projects that go over budget and suck up cash.
The firstmentioned is the most difficult to track and control - it needs to be measured as a trend and a risk event occurs when the pre-agreed threshold compared to the same period a year ago, etc is exceeded.