Page 212 - RISK Management IC 86

Risk Management

(b) Corporate risk attitudes
(c) Monitoring and review of risk management
(d) Risk financing by borrowing

Ans. (a) When charging losses against operating costs, an
organization need to absorb the additional
expenditure within a short time. Its ability to do so
depend upon either surplus of receipts over payments
throughout the year, or sufficient liquidity.

Therefore, the size of loss or an accumulation of
losses that be absorbed alongside other current
expenses depend upon the size of cash flow
surplus / deficit plus liquid reserves/short term
borrowing. The art of financial management has
been defined as having available money when
needed, money being a scarce resource which
commands a price.

The objectives of cash budgeting are to avoid holding
large idle cash balances on current accounts which
make no contribution to earnings, and on the other
hand, minimize the risk of being unable to meet from
current cash or sudden borrowing. Even perfectly
solvent organizations may be embarrassed by a

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