Current Trends and Future Opportunities for Financial Risk Management Consulting Industry

Financial risk management is the practice of protecting the economic value of a company through the use of financial instruments to manage risk: operational risk, credit risk and market risk, currency risk, form risk, volatility risk, liquidity risk, inflation risk, business risk, legal risk, reputational risk, industry risk, etc. Similar As with general risk management, financial risk management requires identifying its sources, measuring them, and plans to address them.

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Some of the key players of Financial Risk Management Consulting Industry:

Accenture, Aon, Crowe, EY, KPMG, Deloitte, McKinsey & Company, Protiviti, BCG, PwC, MorganFranklin, RSM

Financial risk management can be qualitative and quantitative. As a risk management specialization, financial risk management focuses on when and how financial instruments for controlling costly risk positions can be hedged. In the banking sector around the world, the Basel Accords are generally adopted by international banks for tracking, reporting and disclosing operational, credit and market risks.

Financial theory (i.e., financial economics) dictates that a company should take over a project if it increases shareholder value. Financial theory also shows that corporate managers cannot create value for shareholders, aka investors, by taking on projects that shareholders could do for themselves at the same cost. In terms of financial risk management, this means that corporate managers should not hedge against risks that investors can hedge for themselves at the same cost. This term was captured by the so-called "hedging irrelevance offer": In a perfect market, the company cannot create value by hedging a risk if the price for bearing this risk within the company corresponds to the price for carrying it outside the company the Company. In practice, financial markets are unlikely to be perfect markets.