Considerations on the financial risks in shipping industry
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
Volume (Year): 15 (2011)
Issue (Month): 1 ()
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