How does risk affect a company's financial decisions?

How does risk affect a company’s financial decisions?


By Sharvari Saraf

PGDRM Jan’20-21


The dependency on risk identification, mitigation, and management has increased in both financial institutions and corporates. The main reason for this is the changing economic landscape.

Financial decision plays a very crucial to know how, when, and where one should be acquiring a business fund.

In any organisation, the maximisation of the profit happens when the market estimates of the organisation increases which largely depends on the financial decisions.


There are generally four different kinds of financial decisions:

  1. Capital Budgeting i.e. Application of funds
  2. Capital structure i.e Procurement of funds
  3. Dividend decision i.e. Distribution of funds
  4. Working capital management decision


Capital Budgeting Decision:

Capital budgeting decision helps the financial manager to analyse the size of the firm and to take decisions like where the amount is to be invested and how to invest it. It’s basically a process of planning and managing the firm’s long-term investment.


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