Measuring Business Risk Through Cash Flow at Risk: Modeling and Hedging Choices in a Multinational Company Based in an Emerging Country
21 Pages Posted: 11 Dec 2013
Date Written: January 10, 2006
Abstract
This paper describes a real life experience of cash flow modeling in the context of Enterprise Risk Management (ERM). Increasing evidence supports the adoption of a disciplined approach to forecast “value-driving” variables and to develop functional relationships that estimate their impact on the value of the firm. We present a brief theoretical discussion of the arguments in favor and against the utilization of ERM techniques, and proceed to the presentation of the Measurement of Cash Flow at Risk model (MCFR) and the Risk Calibration Choices (RCC) model used at Cemex, a Multinational Company based in Mexico.
Keywords: Risk, Emerging Markets, Cash Flow Modeling
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