Abstract
Capital management and risk management are two sides of the same coin but conventional finance theory treats them separately. Capital management focuses on delivering the optimal balance sheet (composed of equity and debt) that minimises the cost of capital. It is the domain of the chief financial officer (CFO). Currently the term risk management refers to the roles of the risk manager and treasurer, working separately in the insurance and capital markets to manage the firm’s operational and financial risks.
This chapter is an excerpt from Prakash A. Shimpi (ed.), Integrating Corporate Risk Management (Swiss Re New Markets, 1999) London and New York, ch. 3.
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Notes
For example Richard A. Brealey and Stewart C. Myers, Principals of Corporate Finance, 5th ed. (New York: McGraw-Hill, 1996)
Franco Modigliani and Merton Miller, ‘The Cost of Capital, Corporation Finance and the Theory of Investment’, American Economic Review, vol. 48 (1958), pp. 261–97.
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© 2001 Prakash Shimpi
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Shimpi, P. (2001). Integrating Risk Management and Capital Management. In: Mikdashi, Z. (eds) Financial Intermediation in the 21st Century. Palgrave Macmillan, London. https://doi.org/10.1057/9780230294127_5
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DOI: https://doi.org/10.1057/9780230294127_5
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-42143-5
Online ISBN: 978-0-230-29412-7
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