ARTICLE ON "THE RELATIONSHIP BETWEEN RISK MANAGEMENT AND FIRM PROFITABILITY"
Keywords:
Risk Management, Firm Profitability, Financial Performance, Enterprise Risk Management, Profit MarginsAbstract
This article explores the relationship between risk management and firm profitability, drawing on recent empirical studies and theoretical frameworks. Risk management, particularly enterprise risk management (ERM), serves as a critical tool to identify, assess, and mitigate financial and operational risks, potentially enhancing firm value and profitability. Evidence suggests that effective risk management reduces costly financial distress, bankruptcy risks, and aligns strategic decision-making, contributing positively to profit margins and operational efficiency. However, some studies indicate that excessive focus on risk may negatively impact profitability due to costs and operational constraints. The article discusses these dynamics supported by data from various industries and concludes with practical implications for managers aiming to optimize risk and reward.
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