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Navigating the Risks: A Systematic Literature Review of Financial Risk Management Practices in Venture Capital

In: Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024)

Author

Listed:
  • Zufrial Aristama

    (Universitas Pendidikan Indonesia)

  • Afriska Yuni Anggraini

    (Universitas Pendidikan Indonesia)

  • Ika Putera Waspada

    (Universitas Pendidikan Indonesia)

Abstract

This systematic literature review examines financial risk management practices within the venture capital (VC) industry, comprehensively assessing strategies and tools to mitigate investment risks. The study seeks to answer the question: How do venture capital firms manage financial risks, and what are the most effective strategies and tools used to address these risks? Through a structured SLR methodology, this review analyzed scholarly articles published between 2013 and 2023, highlighting the primary risk management strategies employed by VC firms: staged financing, financial contracting, active governance, and diversification. Staged financing enables VCs to align capital disbursements with company milestones, reducing exposure, while financial contracting, including convertible securities, aligns investor and entrepreneur interests. Active governance practices like board participation allow VCs to maintain oversight, and diversification spreads risk across sectors or stages. Despite the critical role of financial risk management in venture capital, there is a noticeable gap in academic reviews that holistically address these practices. This study consolidates existing literature, identifies key trends, and pinpoints areas needing further exploration, offering a nuanced understanding of financial risk management within venture capital and guiding future research and practice.

Suggested Citation

  • Zufrial Aristama & Afriska Yuni Anggraini & Ika Putera Waspada, 2025. "Navigating the Risks: A Systematic Literature Review of Financial Risk Management Practices in Venture Capital," Advances in Economics, Business and Management Research, in: Ratih Hurriyati & Sulastri Sulastri & Lisnawati Lisnawati & Lili Adi Wibowo (ed.), Proceedings of the 9th Global Conference on Business, Management and Entrepreneurship (GCBME 2024), pages 410-417, Springer.
    • Handle: RePEc:spr:advbcp:978-94-6463-817-2_50
    DOI: 10.2991/978-94-6463-817-2_50
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