Strategic Risk Taking: A Framework for Risk Management

by Aswath Damodaran

In business and investing, risk has traditionally been viewed investors and companies can lose money due to risk and therefore we typically penalize companies for taking risks. That’s why most books on risk management focus strictly on hedging or mitigating risk. But the enterprise’s relationship with risk should be far more nuanced. Great companies become great because they seek out and exploit intelligent risks, not because they avoid all risk. Strategic Risk A Framework for Risk Management is the first book to take this broader view, encompassing both risk hedging at one end of the spectrum and strategic risk taking on the other. World-renowned financial pioneer Aswath Damodaran–one of BusinessWeek’s top 12 business school professors–is singularly well positioned to take this strategic view. Here, Damodaran helps you separate good risk (opportunities) from bad risk (threats), showing how to utilize the former while protecting yourself against the latter. He introduces powerful financial tools for evaluating risk, and demonstrates how to draw on other disciplines to make these tools even more effective. Simply put, Damodaran has written the first book that helps you use risk to increase firm value, drive higher growth and returns, and create real competitive advantage. • the history and the psychology The non-financial realities you must understand to successfully manage risk • Risk from the basics to the cutting edge Risk Adjusted Value, probabilistic approaches, Value at Risk, and more • Utilizing the power of real options Extending option pricing models to reflect the potential upside of risk exposure • Risk the big picture Integrating traditional finance with corporate strategy–and using risk strategically

Genres: Finance, Business, Economics, Nonfiction

388 pages, Hardcover

First published August 2, 2007

About the author

Aswath Damodaran is a Professor of Finance at the Stern School of Business at New York University (Kerschner Family Chair in Finance Education). He is well known as the author of several widely used academic and practitioner texts on Valuation, Corporate Finance and Investment Management; as well as a provider of comprehensive data for valuation purposes.

Reviews

[Harry Karoussos]

Forward-looking approach to risk, w/ potential to help managers and analysts reconsider "true" risk in business decisions and valuations. Current market models, and their underlying assumptions dating all the way back to Bachelier's Brownian Motion of prices, seem, indeed, to be up for strict and thorough reconsideration, amidst all the heavy, limiting assumptions they set out, and generalisation they suggest, about how markets are thought to operate - also, often downplaying their actual complexity and volatility.

[Jimmy · Rating 5 out of 5]

This book is good, but probably too verbose and organization is somewhat chaotic.

[Bo Howell · Rating 4 out of 5]

A good overview of managing both sides of business risk. Damodaran's book is ready to read and understand.It also pairs nicely with his book on valuation.

[E · Rating 5 out of 5]

Savvy guide to managing risk strategically

Many businesses could do a better job of exploiting risks. Unfortunately, not every business manager knows how. In his perceptive book, Aswath Damodaran details the principles and tools that most good risk managers use. Some of his work resembles a textbook. Appendixes with mathematical proofs of risk assessment models follow several chapters. But the book is mostly a readable blend of qualitative and quantitative insight. The author uses math more to illustrate concepts than to reduce them to equations. For students of risk management, this is great supplementary reading. getAbstract also believes this book would be an especially useful reference for specialists in corporate finance and investment management.

[Franco Arda · Rating 4 out of 5]

THE BIG PICTURE ON RISK TAKING
Insightful of broad risk taking without going to deep into single subjects. Readers interested in
gaining deeper knowledge can then find specific books on the subject. I found chapters 11, Strategic Risk Management, the most original. Again, no great depth but a great big picture view on fundamental issues in risk taking such as 'Value and Risk Taking', 'Evidence on Risk Taking and Value' and 'Building the Risk-Taking Organization'. It's not a book for traders rather for corporates executives/risk managers/consultants/students and ... maybe for for academically inclined entrepreneurs.

[Synthia Salomon · Rating 3 out of 5]

This is less of a review and more like my own notes

Crisis alpha

resilient investment strategies like trend-following

advanced risk management methods like volatility targeting and strategic rebalancing, **further insulate your portfolio.

Finally, these integrated strategies outperformed traditional investments during the pandemic-induced crash.