Risk management practices of German firms

TLDR

Risk management research has identified gaps, yet German firms report no major difficulty in developing systems, though the relevance of risks varies with management intensity and further consistency with prior studies is needed. The study investigates risk management practices in large, non‑financial German firms to address identified research gaps. The authors rank derivative types, evaluate management of foreign‑exchange, US$ exposure, and interest‑rate risks, and assess attitudes toward these risk areas. The study finds that firm survival is the primary risk‑management goal, respondents are risk‑neutral on financial risks, about half centralize treasury management, and 88 % use derivatives.

Abstract

Identifies some gaps in corporate risk management research and presents a study of risk management practices in large, non‐financial German firms. Compares the perceived relevance of different types of risk with the intensity of their management and reports that no respondents admitted major difficulty in developing a risk management system. Finds that firm survival is rated as the top goal of risk management, that respondents are closer to risk‐neutral than risk‐averse for financial risks, that around half centralize treasury management and 88 per cent use derivatives. Ranks the types of derivatives used and the importance of associated problems; shows how foreign exchange risk, US $ exposure and interest rate risk are managed; and assesses attitudes towards foreign exchange and interest rate risk management. Considers consistency with other research and calls for more.