Evaluating financial risk management in corporation financial security systems
Master’s in Business Analytics, Trine University, USA.
Review Article
World Journal of Advanced Research and Reviews, 2024, 23(01), 2203–2213
Publication history:
Received on 10 June 2024; revised on 19 July 2024; accepted on 22 July 2024
Abstract:
Systemic risks are relevant to most segments of financial and economic activity, which creates the threat of financial instability of enterprises. Financial security, in this case, implies the state of financial soundness; it is expressed through various parameters including the level of solvency, financial stability, business activity, and efficiency of management. These questions are specific to each indicator, and this paper aims to understand their relations and how changes in them can result in risks. It elaborates the risk analysis and assessment procedure that uses a set of common financial analysis tools and determines key financial coefficients. Liquidity ratios, solvency ratios, profitability ratios, and the risk exposure metrics are the key areas that the research is based on. Correlating the financial indicators from a rich dataset from Yahoo’s Stock market data, regression analysis is used to determine these relationships between these indicators and risk management factors. A positive relationship between liquidity ratios and profitability is detected points to the fact that, firms with high liquidity levels are more capable of attaining good financial health and returns. It establishes the need for the development of a credible risk management structure that would lower threats to fiscal and economic activities. In light of this, the research shows that the liquidity and solvency management lowers financial risk and improves return for companies. The regression analysis was conducted to ascertain the degree of predictability of each independent variable to the dependent variable and the findings revealed that approximately 94 percent of each independent variable is predictable of the dependent variable that able to establish as much as 5% of the total variability in profitability, with the PE ratios being an indication of this aspect, was attributed to stock prices, as a result, the firm must be keen on its financials. This paper explores the employability of the proposed methods and models to assess the risks with high accuracy and supports optimum decision making in regard with the needed security of the enterprises. By adopting these methodologies, the businesses can observe and estimate risks which exist in the future which would help them to avoid certain issues or dangers and also pave the way for the improvements of the financial stability of the businesses. On this note, the study establishes the fact that incorporating the notion of total risk management into the framework of analyzing business and making financial decisions is inevitable in maintaining corporate financial stability and realizing perpetual economic solidity. This research enriches the literature on financial risk management, as it outlines viable strategies for the protection of enterprise financial sustainability.
Keywords:
Financial risks; Security management system; Financial risk analysis; Corporate finance and risk mitigation
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