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The CFO’s Information Challenge in Managing Macroeconomic Risk

Author

Listed:
  • Oxelheim, Lars

    () (Research Institute of Industrial Economics (IFN))

  • Wihlborg, Clas

    () (Argyros School of Business)

  • Thorsheim, Marcus

    () (Lund Institute of Economic Research)

Abstract

In this chapter we examine the role of the CFO in setting risk management strategy with respect to macroeconomic risk, in particular, and we consider the information requirements for setting a strategy that is consistent with corporate objectives. We argue that macroeconomic risk management requires a broad approach encompassing financial, operational and strategic considerations. Furthermore, several interdependent sources of risk in the macroeconomic environment must be taken into account. Once this interdependence among, for example, exchange rates, interest rates and inflation are taken into account macroeconomic risk management can be considered a relatively self-contained aspect of Integrated Risk Management (IRM) provided relevant information is available to management. Financial risk management cannot be considered a self-contained part of macroeconomic risk management, however, since value increasing investments in flexibility of business operations affect corporate exposure and make it uncertain.

Suggested Citation

  • Oxelheim, Lars & Wihlborg, Clas & Thorsheim, Marcus, 2010. "The CFO’s Information Challenge in Managing Macroeconomic Risk," Working Paper Series 847, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0847
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    Keywords

    Risk Management Strategy; Macroeconomic Risk; Integrated Risk Management; Chief Financial Officer; Information Needs; Corporate Strategy; Financial Risk; Real Options;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G01 - Financial Economics - - General - - - Financial Crises
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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