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Considerations on the financial risks in shipping industry

Listed author(s):
  • Batrinca Ghiorghe

    (Constanta Maritime University)

  • Burca Ana-Maria

    (Constanta Maritime University)

In general, business-risk management is concerned with the possible decline in the value of a shipping company due to an event, or a change, in any of the factors that affect its value. Fundamentally, the value of a company depends on the expected net cash flows from its operations. Therefore, any factor that may have a negative impact on the expected net cash flows is identified as a risk. Due to the capital-intensive nature of shipping and the fact that most vessel acquisitions are financed through term loans priced on a floating-rate basis, unanticipated changes in interest rates may have an adverse impact on the assets and liabilities of a company and can lead to severe liquidity problems and cash-flow mismatch, especially given the business-cycle dynamics of shipping markets. Consequently, interest-rate risk measurement and mitigation is an indispensable aspect of shipping risk management

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Article provided by Constanta Maritime University in its journal Constanta Maritime University Annals, Vol. 15, 2011.

Volume (Year): 15 (2011)
Issue (Month): 1 ()
Pages: 25-28

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Handle: RePEc:cmc:annals:v:15:y:2011:i:1:p:25-28
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