Corporate Risk Management Essay Example | Topics and Well Written Essays - 1250 words

Corporate Risk Management - Essay ExampleThe expenditures of the stemma in order to compensate the fleshly damages of workplace and manpower could serve as important inputs in the process of capital budgeting that has the objective to determine the factual net present value and internal rate of return of the business (Shapiro, 2008, p. 42). Firms exposure to physical endangerment The physical find is the maiden venture that extend tos the organization and its people. The establishments, factories, plants and buildings in which the business is carried out as well as the employees of the business house are subject to physical risk. The physical risk to the business occurs as result of the uncertainty of the occurrence of unforeseen situations and accidents that badly affects the infrastructure of the business and its entire business set up. The physical risk may occur due to the unfortunate incidents of fire breakout in the company buildings. There may be accidents as a result of the explosions happening inwardly the workplace (Megginson andSmart, 2008, p. 63). The companies spend substantial amounts in setting up the business infrastructure. A huge amount of expenditure is incurred by the business in constructing the part set up, the interior decoration and the wooden construction for making the buildings and its rooms suitable for official use. The other expenditures include glass fittings, work place arrangement of improved designs. The corporate look in the offices is due to the standardization of the infrastructure for business that is necessary to be established in the workplace. The occurrence of fire accidents and minor explosions inside the office buildings are huge risks as it destroys the infrastructure for carrying out business operations and also injures or adversely affects the manpower resources of the business. The physical risk for the business may also be due to the spillage of hazardous materials in the workplace. The hazardous ma terials like the acids, gases, toxic wastes, and toxic fumes could adversely affect the employees of the company which would in turn affect the business operations. Physical Risk consideration in Capital budgeting The capital budgeting techniques are aimed at assessing the feasibility of the business investment in a particular project. The capital budgeting techniques assess the viability of business investments with the help of various approaches that determines the extent to which the business is profitable. The assessment of the business takes into account the risk of the business. The physical risks associated to the business takes into account the several factors of uncertainty that would reduce the net valuation of the business or the expected return from the business investments (Chandra, 2008, p. 96). The consideration of the physical risk is thereby necessary to determine the feasibility of the investments through Capital budgeting techniques. The various capital budgeting techniques used to judge the viability of the investment are the Net chip in Value method, the Internal Rate of Return, etc. The Net Present value of the business is the actual present value of the business adjusted with the initial investments required for starting the project (Lumby, 1988, p. 84). The Net Present Valu