Abstract
Using a formal model, the paper analyzes risk management for nonfinancial corporations. A firm is considered that produces and sells divisional products. This triggers uncertain cash flows, the risk of which is measured by the Cash Flow at Risk (CFaR)-concept. The CFaR determines the required amount of equity. Several possibilities of implementing a risk management system are discussed, with a particular focus on the required equity. A major result is that a more restrictive risk policy does not necessarily lead to an increasing demand of equity. Furthermore, for the case of several divisions the differences of centralized and decentralized risk management are analyzed.
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