Risk and Uncertainty
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Definitions
•Risk and Uncertainty
•Risk
–Measurable
•Uncertainty
–Information missing
–Rumsfeld know knowns......
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Uncertainty/information
availability
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Risk and reward
•2x2 matrix
•Information incompleteness
•Contract incompleteness
–Provisions to cope with uncertainty
•Company procedures to anticipate risk/return
–Commercial management
•Client protection
–Design
teams
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Influencing factors
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons,
Ltd.
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Corporate governance
• Voluntary self regulation
• Statutory requirements
– UK corporate governance code
• Opennes
• Integrity
• Accountability
– Companies Act
– Turnbull report
• Reporting on risk exposure
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Capital
• Working capital
–Definition
–Sources
•Loan
•Equity
–Where reported
•Balance sheet- current assets
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Flexibility and capital
• Sources
– Loans
– Credit
– PAYE
• Banks vs Shareholders
– Capital gearing
– Working capital ratios
•Current/acid
•Liquidity
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Profitability
• Definition
• Income gearing
• Work in progress
– Measurement of profit
– Establishment of value
– Establishment of cost
• Payment has no connection with value
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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Insolvency
• Risks and their management
• Limited liability
• Instability
– Coping strategies
– Indicators
– Links to industry demand and market
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons,
Ltd.
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Credit control
• Definition
• Debtor days
• Creditor days
• Management of income/expenditure
© 2013 Andrew Ross and Peter Williams. Published 2013 by John Wiley & Sons, Ltd.
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