Finance Capital & Risk Management

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Financial capital
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For a city with an important role in the world economy, see Financial centre and Global city.
Not to be confused with Capital (economics).

Capital exports in 2006

Capital imports in 2006
Financial capital is any economic resource measured in terms of money used by entrepreneurs and businesses to buy what they need to make their products or to provide their services to the sector of the economy upon which their operation is based, i.e. retail, corporate, investment banking, etc.


Contents
1   Three concepts of capital maintenance authorized in IFRS
2   Sources of capital
2.1   Capital market
2.2   Money market
3   Differences between shares and debentures
4   Fixed capital
4.1   Factors determining fixed capital requirements
5   Working capital
5.1   Factors determining working capital requirements
6   Instruments
7   Own and borrowed capital
7.1   Borrowed capital
7.2   Own capital
8   Issuing and trading
9   Broadening the notion
10   Marxist perspectives
11   Valuation
12   Economic role
13   See also
14   References
15   Further reading
Three concepts of capital maintenance authorized in IFRS
Financial capital or just capital/equity in finance, accounting and economics, is internal retained earnings generated by the entity or funds provided by lenders (and investors) to businesses to purchase real capital equipment or services for producing new goods/services. Real capital or economic capital comprises physical goods that assist in the production of other goods and services, e.g. shovels for gravediggers, sewing machines for tailors, or machinery and tooling for factories.

Financial capital generally refers to saved-up financial wealth, especially that used to start or maintain a business. A financial concept of capital is adopted by most entities in preparing their financial reports. Under a financial concept of capital, such as invested money or invested purchasing power, capital is synonymous with the net assets or equity of the entity. Under a physical concept of capital, such as operating capability, capital is regarded as the productive capacity of the entity based on, for example, units of output per day. Financial capital maintenance can be measured in either nominal monetary units or units of constant purchasing power.[1][2] There are thus three concepts of capital maintenance in terms of International Financial Reporting Standards (IFRS): (1) Physical capital maintenance (2) Financial capital maintenance in nominal monetary units (3) Financial capital maintenance in units of constant purchasing power.[1][3] Framework for the Preparation and Presentation of Financial Statements,

Financial capital is provided by lenders for a price: interest. Also see time value of money for a more detailed description of how financial capital may be analyzed.

Furthermore, financial capital, is any liquid medium or mechanism that represents wealth, or other styles of capital. It is, however, usually purchasing power in the form of money available for the production or purchasing of goods, etcetera. Capital can also be obtained by producing more than what is immediately required and saving the surplus.

Financial capital can also be in the form of purchasable items such as computers or books that can contribute directly or indirectly to obtaining various other types of capital.[4]

Financial capital has been subcategorized by some academics as economic or "productive capital" necessary for operations, signaling capital which signals a company's financial strength to shareholders, and regulatory capital which fulfills capital requirements.
Risk management:

Example of risk assessment: A NASA model showing areas at high risk from impact for the International Space Station
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Risk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events[1] or to maximize the realization of opportunities.

Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. There are two types of events i.e. negative events can be classified as risks while positive events are classified as opportunities. Several risk management standards have been developed including the Project Management Institute, the National Institute of Standards and Technology, actuarial societies, and ISO standards.[2][3] Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.

Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat, and the opposites for opportunities (uncertain future states with benefits).

Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk; whereas the confidence in estimates and decisions seem to increase.[1] For example, one study found that one in six IT projects were "black swans" with gigantic overruns (cost overruns averaged 200%, and schedule overruns 70%).[4]


Contents
1   Method
2   Principles
3   Process
3.1   Establishing the context
3.2   Identification
3.3   Assessment
4   Risk options
4.1   Potential risk treatments
4.2   Risk management plan
4.3   Implementation
4.4   Review and evaluation of the plan
5   Limitations
6   Areas
6.1   Enterprise
6.2   Enterprise Security
6.3   Medical device
6.4   Project management
6.5   Megaprojects (infrastructure)
6.6   Natural disasters
6.7   Information technology
6.8   Petroleum and natural gas
6.9   Pharmaceutical sector
7   Risk communication
8   See also
9   References
10   External links
source:wikipedia.org