The Impact of Risk Management on Financial Decisions

Jalal Mahmoud Abd Mahmoud presented in the celebration of Gate Academy on "The Impact of Risk Management on Financial Decisions":

 

Introduction

Since ancient times, humans have been exposed to numerous risks that result in either financial losses or harm to individuals themselves. Because economic entities operate in a volatile environment that threatens their stability and constantly exposes them to various risks that jeopardize the achievement of their goals, this negatively affects the continuity of the entity aimed at fulfilling its mission. Over time, competition has intensified, and the interconnections between the entity and its immediate and distant environment have become more complex. Additionally, fluctuations and surprises have increased, allowing risks to grow in magnitude, diversity, continuity, and renewal. Moreover, the instability of the environment and the intensification of competition in an uncertain environment make it difficult to make accurate estimates or control their management.

Due to changes in the business environment and the intensity of competition, a reevaluation of financial reporting models has been undertaken due to their lack of transparency and clarity of information. The importance of disclosing risks emerges from their role in enhancing the efficiency of the financial market and improving risk management strategies.

The research examines risk management in companies as well as the methods and mechanisms adopted by companies to mitigate future risks. It also explores the factors influencing companies in disclosing the risks they face and how all of this affects financial decision-making in Egyptian companies, the subject of the study.

 

Research Problem

Many companies and financial institutions, such as banks, face significant risks that affect the financial decisions made by these companies and institutions. The study seeks to determine the impact of risk management on financial decisions, with the main question being: "What is the impact of risk management on financial decisions?"

 

From this main question, several sub-questions arise, including:

- What is meant by risk management?

- What are the methods of dealing with risks?

- What is the relationship between risk disclosure and liquidity management in the company?

- What is the relationship between risk disclosure and the selection of financing methods?

 

Significance of the Study

Scientific Significance: This study can be considered a source for researchers and scholars who wish to further understand the impact of risk management on financial decisions. It could serve as a starting point for researchers and enthusiasts to conduct further research in this field.

Practical Significance: The study may yield results that can contribute to providing recommendations and suggestions to decision-makers and managers within companies to improve their efficiency and achieve the best possible performance, helping them make fruitful financial decisions.

 

Study Objectives

The study aims to determine the impact of risk management on financial decisions by achieving several subsidiary objectives, including:

- Defining risk management.

- Identifying methods of risk management.

- Determining the relationship between risk disclosure and liquidity management in the company.

- Determining the relationship between risk disclosure and the selection of financing methods.