Corporate Risk Analysis
Strategy @Risk has developed a radical and new approach to the way risk is assessed and measured when considering current and future investment. A key part of our activity in this sensitive arena has been the development of a series of financial models that facilitate understanding and measurement of risk set against a variety of operating scenarios.
We have written a paper which outlines our approach to Corporate Risk Analysis to outline our approach. Read it here.
Our purpose in this paper is to show that every item written into a firm’s profit and loss account and its balance sheet is a stochastic variable with a probability distribution derived from probability distributions for each factor of production. Using this approach we are able to derive a probability distribution for any measure used in valuing companies and in evaluating strategic investment decisions. Indeed, using this evaluation approach we are able to calculate expected gain, loss and probability when investing in a company where the capitalized value (price) is known.
