Financial Risk Management

Siegfried M. Erorita, cpa,mba

 Coverage
• Introduction
– What is Financial Risk Management?
– When is Financial Risk Management Applicable?
– For Whom is Financial Risk Management?
– Where is Financial Risk Management applicable ?
– Why is Financial Risk Management important?
– How is Financial Risk Management Done?
 Coverage
• Financial Risk and Return
Fundamentals
• Financial Risks of Assets
• Risk of a Portfolio
• Risk and Return: The Capital Asset
Pricing Model ( CAPM)
Financial Risk Management
• The art and science of planning
leading, organizing, and controlling
the chance of financial economic
loss or the variability of financial
economic returns associated with a
given financial decision.
 Financial Risk Management
• This is applicable when managers’
decisions are financial in nature.
• The concepts of FRM are intended not
only for finance managers but for all
persons who make financial and
investment decisions.
• Where there are financial and
investment decisions, there is FRM.
• FRM is as unavoidable as risk, return,
time, and money matters…
Risk and Return Fundamentals
• Risk- The chance of financial loss or,
more formally, the variability of returns
associated with a given asset.
• Return- The total gain or loss
experienced on an investment over a
given period of time; calculated by
dividing the asset’s cash distributions
during the period, plus change in value
by its beginning-of –the-period
investment value.
 • Firm-Specific Risks
– Business Risk
– Financial Risk
• Shareholder-Specific Risks
Popular Sources
– Interest Rate Risks
of Risk Affecting – Liquidity Risks
Financial – Market Risks
Managers and • Firm and Shareholder Risks
Shareholders – Event Risks
– Exchange Rate risks
– Purchasing Power Risks
– Tax Risks
 Rate of Return

Determine the rate of return for the two assets

Asset C D
Value 1 year ago 20,000.00 12,000.00
Market value 21,500.00 11,800.00
After tax receipts 800.00 1,700.00

Rate of return 0.115 0.125

kt= Ct+Pt-Pt-1
Pt-1
Historical Returns for Selected Security Investments (1926-2000)
source: stocks, bonds, bills, and inflation, 2001 yearbook
( Chicago: Ibbotson Associates, inc, 2001)

Investment Average annual return

Large company stocks 13.0%
Small company stocks 17.3%
Long term corporate bonds 6.0%
Long term government bonds 5.7%
U.S. Treasury bills 3.9%

Inflation rate 3.2%

 Risk Preferences
• Risk-indifferent- The attitude toward risk
which no change ion return would be required
for an increase in risk.

• Risk averse- The attitude toward risk in

which an increased return would be required
for an increase in risk.

• Risk seeking- The attitude toward risk in

which a decreased return would be accepted
for an increase in risk.
Required ( or Expected) Return
Risk averse

Averse

Indifferent Risk indifferent

Seeking

Risk seeking

x1 x2
Risk
 Risk of a Single Asset
• Sensitivity Analysis- An approach
for assessing risk that uses several
possible-return estimates to obtain a
sense of variability among outcomes.
One common method involves making
pessimistic, most likely, and optimistic
estimates. The assets risk can be
measured by the range of returns.
 Risk of a Single Asset
• Range- A measure of an asset’s
risk, which is found by subtracting
the pessimistic outcome from the
optimistic outcome. The greater
the range, the more the variability,
or risk, the asset is said to have.
 Sensitivity Analysis

Assets A B
Initial investment 10,000.00 10,000.00
Annual rate of return
Pessimistic 13% 7%
Most likely 15% 15%
Optimistic 17% 23%
Range 4% 16%
 Probability Distributions- A model
that relates probabilities to the
associated outcomes.

Probability distributions
Probability of occurrence

0.6 0.6
0.5 0.5
0.4 0.4
0.3 0.3
0.2 0.2
0.1 0.1

13 15 17 7 15 23
Return (%) Return (%)
 Continuous Probability Distribution-
Shows all the possible outcomes and
associated possibilities for a given event.

Asset A
Probability Density

Asset B

7 13 15 17 25
Return (%)
 Risk Measurement
• Standard Deviation- Measures
the dispersion around the expected
value. (see equation 3). The
higher the standard deviation, the
higher the risk.
n

σk= Σ(kj-k)2 x Prj

j=1
 Risk Measurement
• Expected value of a return- The
most likely return on a given
asset. (See equation 2 on
appendix a.)
n
k=Σkj x Prj
j=1
Expected Values of Returns for Assets A and B

Possible Outcomes Probability x Returns = Weighted Value

Asset A
Pessimistic 0.25 13% 3.25%
Most likely 0.50 15% 7.50%
Optimistic 0.25 17% 4.25%
Total 15.00%

Asset B
Pessimistic 0.25 7% 1.75%
Most likely 0.50 15% 7.50%
Optimistic 0.25 23% 5.75%
Total 15.00%
Standard deviation for assets A and B

kj k k j-k (k j-k )2 Prj (k j-k )2xPrj

Assets A
1 13% 15% -2% 4.0% 25% 1.0%
2 15% 15% 0% 0.0% 50% 0.0%
3 17% 15% 2% 4.0% 25% 1.0%
Total 2%

Std Dev 1.41%

kj k kj-k (kj-k)2 Prj (kj-k)2xPrj

Asset B
1 7% 15% -8% 64.0% 25% 16.0%
2 15% 15% 0% 0.0% 50% 0.0%
3 23% 15% 8% 64.0% 25% 16.0%
Total 32%

Std Dev 5.66%

Historical Returns and Standard Deviation for Selected Security Investments
(1926-2000)
source: stocks, bonds, bills, and inflation, 2001 yearbook
( Chicago: Ibbotson Associates, inc, 2001)

Investment Average annual return Standard Deviation

Large company stocks 13.0% 20.2%
Small company stocks 17.3% 33.4%
Long term corporate bonds 6.0% 9.7%
Long term government bonds 5.7% 8.4%
U.S. Treasury bills 3.9% 3.2%
Inflation rate 3.2% 4.4%
• Coefficient of Variation- A
measure of relative dispersion that
is useful in comparing the risks of
assets with differing expected
returns. ( See equation 4 in
Appendix a). The higher the
coefficient of variation, the higher
the risk.

CV= σk
k
Coefficient of Variation
When the standard deviations and expected eturns for assets A and B are substituted to
to the equation, the coefficients of variation are:

Asset A B
Standard deviation 1.41% 5.66%
Expected return 15% 15%
CV 0.094 0.377

Another example
Asset X Y
Standard deviation 9.00% 10.00%
Expected return 12% 20%
CV 0.75 0.5
 Risk of a Portfolio
• Risk of a Portfolio- The risk of any
single investment would not be viewed
independently of other assets. New
investments must be considered in light
of their impact on the risk and return of
the portfolio of assets. The financial
manager’s goal is to create an efficient
portfolio, one that maximizes return for
a given level of risk or minimize risk for
a given level of return.
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 Risk of a Portfolio
• Portfolio Return and Standard
Deviation- the return on a
portfolio is a weighted average of
the returns on the individual
assets from which it is formed.(
see equation 7 on appendix a).
Expected Return, Expected Value, Standard Deviation,
of Returns for Portfolio XY
A. Expected Portfolio Returns
Forcasted Returns
Year Assets X Assets Y Portfolio return calculations Expected portfolio return
weight 50% 50%
2007 8% 16% ( .50 x 8%)+(.50 X 16%) 12%
2008 10% 14% ( .50 x 10%)+(.50 X 14%) 12%
2009 12% 12% ( .50 x 12%)+(.50 X 12%) 12%
2010 14% 10% ( .50 x 14%)+(.50 X 10%) 12%
2011 16% 8% ( .50 x 16%)+(.50 X 8%) 12%
60%
B. Expected Value of Portfolio Returns
Kp= ( 60%/ 5)= 12%

C. Standard Deviation of expected portfolio returns

=0% ( by substitution)

n
kp=Σwj x kj
j=1
Correlation-

• A statistical measure of the

relationship between two
series of numbers representing
data of any kind
 Kinds of Correlation
• Positively correlated- describes two
series that move in the same direction.
• Negatively correlated- describes
two series that move in opposite
direction.
• Correlation coefficient- a measure of
the degree of correlation between two
series, which ranges from –1 for
perfectly negatively correlated series to
+1 for perfectly positively correlated
series.
Correlations

Asset M Asset M
Return

Return
Asset N Asset N

Time Time
Perfectly Positively Correlated Perfectly Negatively Correlated
 Diversification

• Diversification- To reduce the overall risk, it is

best to combine, or add to the portfolio, assets that
have a negative (or a low positive) correlation.
Combining negatively correlated assets can reduce
the overall variability of returns.

• Some assets are uncorrelated- that is, there is no

interaction between their returns. Combining
uncorrelated assets can reduce risk, not so
effectively as combining negatively correlated
assets, but more effective than combining positively
correlated assets.
 Diversification
Asset F Asset G
Return Return

k k

Time Time

Portfolio of Asset F and G

Return

k
Forcasted Returns, Expected Values, and Standard Deviations for
Assets X,Y and Z and Portfolios XY and XZ

Assets Portfolios
year X Y Z XY XZ
(50%X+50%Y) (50%X+50%Z)
2007 8% 16% 8% 12% 8%
2008 10% 14% 10% 12% 10%
2009 12% 12% 12% 12% 12%
2010 14% 10% 14% 12% 14%
2011 16% 8% 16% 12% 16%

statistics
expected value 12.00% 12.00% 12.00% 12.00% 12.00%
standard deviation 3.16% 3.16% 3.16% 0.00% 3.16%
 Correlation, Diversification, Risk
and Return

The lower the correlation between asset

returns, the greater the potential
diversification of risk. For each pair of
assets, there is a combination that will
result in the lowest risk possible. How much
risk can be reduced by this combination
depends on the degree of correlation. Many
combinations could be made, but only one
combination of the infinite number of
possibilities will minimize risk.
Correlation, Return, and Risk for Various Two Asset Portfolio Combination

Correlation Coefficient Range of Return Range of Risk

+1 (Perfect Positive) Between returns of two assets Between returns of two assets
held in isolation held in isolation

0 ( uncorrelated) Between returns of two assets Between risk of most risky asset
held in isolation and an amount less risk of least
risky asset but greater than 0.

-1 (Perfect Negative) Between returns of two assets Between risk of most risky asset
held in isolation and 0

Illustration

Asset Expected Return Risk ( Standard Deviation)

R 6% 3%
S 8% 8%

Correlation
Coefficient
Ranges of Return Ranges of Risk
+1 (Perfect Positive)

0 ( uncorrelated)

-1 (Perfect Negative)
0 5 6 7 8 9 0 1 2 3 4 5 6 7 8 9
Kr Ks
Portfolio Return Portfolio Risk
 Risk and Return:
The Capital Asset Pricing Model

• The basic theory that links risk and

return for all assets is the capital
asset pricing model. This theory is
used to understand the basic risk-
return tradeoffs involved in all
types of financial decisions.
 Types of Risks
• Diversifiable risk- The portfolio of an asset’s risk
that is attributable to firm-specific, random
causes; can be eliminated through diversification.
Also called unsystematic risk.
• Non diversifiable risk- The relevant portion of
an asset’s risk attributable to market factors that
affect all firms; cannot be eliminated through
diversification. Also called systematic risk.
• Total risk- The combination of a security’s
nondiversifiable and diversifiable risk.
Risk Reduction

Diversifiable risk
Portfolio Risk

Total Risk Non-diversifiable risk

Number of Securities ( Assets) in Portfolio

 The Model: CAPM
The discussion of this model is divided into 5
sections.
• 1.Beta coefficient- the measure of
nondiversifiable risk.
• 2.The equation of the model itself.
• 3.The graph that describes the relationship
of risk and return.
• 4.The effects of changes in inflationary
expectations and risk aversions on the
relationship between risk and return.
• 5.The final section is on the comments of
CAPM.
• Covariance is a measure of how two assets
move together.
• The correlation coefficient is another
measure and takes a value between +1
(perfect positive correlation) and -1 (perfect
negative correlation).
Covab = Corrab * σa * σb
  w    w w Cov
n n n
port= 
i 
i i j ij
i =1 i =1 j =1

Key observation: A portfolio’s risk will always be lower than the

weighted average of the risk of the component
assets unless the assets are perfectly correlated.
σ2port = wi2σi2 + wj2σj2 + 2wiwjCovij
Illustration: A portfolio has 2 assets -- 1 & 2 -- in equal weights.
Asset 1 Asset 2
E(R1) 10% E(R2) 10%
σ1 15% σ2 15%
Correlation
between 1 & 2
Covariance σport
1.00 0.0225 15.00%
0.50 0.01125 12.99%
0.00 0.000 10.61%
-0.50 -0. 01125 7.50%
-1.00 -0.0225 0.00%
Key observation: A portfolio of 2 assets with perfect negative
correlation will have zero volatility.
30%
Returns from Asset 1
25% over time

20%

15%

10% Mean Portfolio Return

5%

0%

-5% Returns from Asset 2

over time
-10%
  w    w w Cov
n n n
port= 
i 

i i j ij
i =1 i =1 j =1

Key observation: The weight of an asset’s various covariances

with every other asset in the portfolio is much greater
than the weight of that asset’s unique risk.
The value of an asset’s unique risk approaches zero in a
well-diversified portfolio.
Therefore, the critical factor to consider when adding
a new asset to a portfolio is its average covariance
with the existing investments.
I’m fully invested in nothing but
stocks. All listed in London. I’m
afraid I’m taking too much risk.

Then why don’t you invest in

emerging market stocks?
 100% EM Equity

assuming perfect
positive
correlation
100% UK Equity 76.18% UK Equity
23.82% EM Equity
 Average Average Expected
Return Risk Value

Bonds 100%

7.72% 6.41% 906,279

Bonds 63%

9.18% 6.41% 1,009,311

Cash 9% Stocks 28% Investment of 500,000 held for 8 years.

Based on gross return data from Jan 1984- Sep 2007.
 Average Average Chances of
Return Risk Loss Year

Bonds 100%

7.72% 6.41% 11.43%

Bonds 42%

7.72% 4.04% 2.82%

Cash 42% Stocks 16%

Investment of 500,000 held for 8 years.
Based on gross return data from Jan 1984- Sep 2007.
 Latin
America

Emerging
Hong Kong
Europe
Europe
ex UK Emerging
US Markets
UK India
Equity
Equity Asia ex
Hedge Japan
UK
Funds Japan
Property
High-Yield
Bonds Commodities
Global
Bonds
USD
Cash
 Average Average Expected
Return Risk Value

Bonds 100%
7.72% 6.41% 906,279

Bonds 63%
9.18% 6.41% 1,009,311

Cash 9% Stocks 28%

Bonds 46%
11.30% 6.41% 1,177,039

Investment of 500,000 held for 8 years.

Based on gross return data from Jan 1984- Sep 2007.
 Average Average Chances of
Return Risk Loss Year

Bonds 100%
7.72% 6.41% 11.43%

Bonds 42%
7.72% 4.04% 2.82%
Cash
42%
Stocks 16%
Bonds 30%
7.72% 2.51% 0.10%

Cash 50%
Gross return data from Jan 1984- Sep 2007.
 1 2 3 4 5

RTQ
score
return

suitable
portfolios
required return

You can tolerate fluctuations in your investment values during

Your risk score is: 23
your time horizon and recognise that portfolio volatility is the
price of above average capital gains. This assessment of your risk
This corresponds to a risk tolerance of 3 tolerance is not indicative of the level of risk that you can afford
on a scale of 1-5 where 5 is most aggressive. or the level of risk that you would need to take in order to
achieve your financial objectives.
risk
The RTQ score marks a line in the sand which we dare not
cross. It is not a very good proxy for suitability.
• Sharpe ratio
average return - riskfree return
standard deviation of returns
• Information ratio
average return - benchmark return
standard deviation of excess returns
• Treynor measure
average return - riskfree return
beta
45,000

Mean return: 4.0%

Standard deviation: 4.8%
35,000

12% to -0.4%

25,000

15,000

-0.4% to 12%
10,000

5,000
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
140,000

Mean return: 4.0%

120,000
Standard deviation: 4.8%
100,000

80,000

12% to -0.4%
60,000

-0.4% to 12%
40,000

20,000

10,000 Results are path-dependent when

+ 1,000/yr
there are interim cash flows.
0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34
 340,000
255 iterations assuming average annual 9% return with a 9% standard deviation

Probability that terminal value

after Year 10 will be less than:
150,000 0.003%
290,000 175,000 0.084%
200,000 1.205%
225,000 8.544%
250,000 31.448%
275,000 65.653%
Balance

240,000 300,000 90.134%

325,000 98.520%
350,000 99.890%

190,000

140,000

101

105

109

113

117

121
13

17

21

25

29

33

37

41

45

49

53

57

61

65

69

73

77

81

85

89

93

97
1

Months
 “secure” “cautious” “balanced” “aggressive” “speculative”
return

A B C D

risk
return

A B C D

risk
 Beta Coefficient (b)
• A relative measure of nondiversifiable
risk. An index of the degree of
movement of an asset’s return in
response to a change in the market
return.
Market return- The return on the
market portfolio of all traded securities.
Deriving beta from Return data- Beta
is derived by getting the slope of
“market return-asset return” function of
a certain asset.
Beta Derivation

Asset Return

40 Asset S
1997
35

30
2002
25 Asset R
2001
20 2003

15 2000

10
1996
5
Market Return
-20 -10 10 20 30 40
-5
1999
-10

-15

-20

-25

-30
Selected Beta Coefficients and Their Interpretations

Beta Comment Interpretation

2.0 Move in the same direction Twice as responsive as the market

1.0 as the market Same response as the market
0.5 Only half as responsive as the market
0.0 Unaffected by market conditions
-0.5 Move in opposite direction Only half as responsive as the market
-1.0 to market Same response as the market
-2.0 Twice as responsive as the market
Beta Coefficients for Selected Stocks ( March 8, 2002)
(source: Value Line Investment Survey ( New York Line Publishing, March, 2002)

Stock Beta
Amazon. Com 1.95
Anheuser-Busch 0.60
Bank One Corp 1.25
Daimler Chrysler AG 1.25
Disney 1.05
eBay 2.20
Exxon Mobil Corp 0.80
Gap (The), Inc 1.60
General Electric 1.30
Intel 1.30
International Business Machines 1.05
Merril Lynch & Co 1.85
Microsoft 1.20
Nike Inc 0.90
PepsiCo, Inc 0.70
Qualcomm 1.30
Sepra Energy 0.60
Wal-Mart Stores 1.15
Xerox 1.25
Yahoo! Inc 2.00
Portfolio betas- this is derived by
applying equation no 9 in the appendix.
Example for Portfolio Betas

Company A wants to maintain 2 portfolios with the following information:

Portfolio V Portfolio W
Asset Proportion Beta Proportion Beta
1 0.10 1.65 0.1 0.80
2 0.30 1.00 0.1 1.00
3 0.20 1.30 0.2 0.65
4 0.20 1.10 0.1 0.75
5 0.20 1.25 0.5 1.05
Total 1.00 1.00

To arrive at the Portfolio's Beta:

Portfolio V Portfolio W
Asset Proportion Beta Proportion Beta
1 0.10 1.65 0.165 0.1 0.80 0.08
2 0.30 1.00 0.3 0.1 1.00 0.1
3 0.20 1.30 0.26 0.2 0.65 0.13
4 0.20 1.10 0.22 0.1 0.75 0.075
5 0.20 1.25 0.25 0.5 1.05 0.525
Total 1.00 1.20 1.00 0.91
 The Equation ( see equation 10)

The CAPM could be divided into two parts: (1)

risk-free of interest, RF which is the required
return for a risk free asset, typically a 3-
month Treasury Bill, a short term IOU issued
by the government, and (2) the risk
premium, which is represented by (km-RF)
and is called the market risk premium,
because it represents the premium the
investor must receive for taking the average
amount of risk associated with holding the
market portfolio of assets. Other things
being equal, the higher the beta, the higher
the required return.
Calculation of Risk Premium from example 9
Historical Returns and Standard Deviation for Selected Security Investments
(1926-2000)
source: stocks, bonds, bills, and inflation, 2001 yearbook
( Chicago: Ibbotson Associates, inc, 2001)

Investment Average annual return Risk free interest Risk premium

Large company stocks 13.0% minus 3.9% = 9.10%
Small company stocks 17.3% minus 3.9% = 13.40%
Long term corporate bonds 6.0% minus 3.9% = 2.10%
Long term government bonds 5.7% minus 3.9% = 1.80%
U.S. Treasury bills 3.9% minus 3.9% = 0.00%
Example on Applying the CAPM Equation

Company B wishes to determine the required return on an asset Z, which has a beta of 1.5.
The risk free rate of return is 7%; the return on the market portfolio of assets is 11%.
By substitution, the required return would be:

bz 1.5 kz= 7% + [ 1.5 x (11% - 7%)]

Rf 7%
km 11% =13%

Kj=RF + [bj x ( km-RF)]

The Graph: The Security Market Line
(SML)

• When the CAPM is depicted graphically,

it is called the securities market line. It
reflects the required return in the
market place for each level of
nondiversifiable risk (beta). In the
graph, risk is measured by beta, b, is
plotted on the x axis, and the required
returns, k, are plotted on the y axis.
The risk-return tradeoff is clearly
represented by the SML.
The Graph: SML

17
16
15 SML
14
kz 13
Required Return, k (%)

12
km 11 Asset Z's
10 Market Risk
9 Risk Premium
8 Premium (6%)
Rf 7 (4%)
6
5
4
3
2
1
0
0.5 1 1.5 2
bm bz

Nondiversifiable Risk, b
 Shifts in the SML
The security market line is not
stable over time, and shifts in the
security market line can result in a
change in required return. The
position and slope of the SML are
affected by two major forces-
inflationary expectations and risk
aversions.
 Shifts in the SML
• Changes in inflationary
expectations affects the risk free
rate of return, RF. The equation for
the risk-free rate of return is:
RF= k* + IP
Shifts in SML Line (Changes in Inflationary Expectations)
Assuming that the Rf of 7% includes 2% real interest rate and 5% inflation premium equated as:
Rf= 2% + 5%= 7%
Due to recent economic events, lets assume that inflationary expectations increased by by 3%.

17 SML 2
kz1 16
15 SML 1
km1 14
Required Return, k (%)
kz 13
12
km 11
Rf= 10% Rf1 10
km= 14% 9
kz=16% 8
Rf 7 increase in IP
6
5 IP
4
3 IP1
2
1
0 k*
bm bz
Nondiversifiable Risk, b
 Shifts in the SML
• Changes in risk aversion. The slope
of the SML reflects the degree of risk
aversion: the steeper its slope, the
greater the degree of risk aversion,
because a higher level of return will be
required for each level of risk as
measured by beta. In other words, risk
premiums increase with increasing risk
avoidance.
Shifts in SML Line (Changes in Risk Aversion)
Assume that due to economic events, investors became more risk averse that they
require a higher market rate of 14%.
17 SML 2
16
15 SML
14
kz 13
Rf= 7% Required Return, k (%)
12
km= 14% km 11 New
kz=17.5% 10 Market
9 Risk
8 Premium
Rf 7 (7%)
6
5
4
3
2
1
0
0.5 1 1.5 2
bm bz

Nondiversifiable Risk, b
 Comments on CAPM
• The CAPM relies on historical data. The
betas may or may not actually reflect
the future variability of returns.
Therefore the required returns specified
by the model can be viewed only as
approximations. Users of betas
commonly make subjective adjustments
to the historically determined betas to
reflect their expectations of the future.
 Comments on CAPM
• The CAPM was developed to
explain the behavior of security
prices and provide a mechanism
whereby investors could asses the
impact of a proposed security
investment on their portfolio
overall risk and return.
 Comments on CAPM
• It is based on an assumed efficient market
with the following characteristics:
• -many small investors, all having the same
information and expectations with respect to
securities;
• - no restrictions on investments
• - no taxes
• - no transactional costs
• - rational investors, who view securities
similarly and are risk averse, preferring higher
returns and lower risk.
 Comments on CAPM
• Although the perfect world of the efficient market
appears to be unrealistic, studies have provided
support for the existence of the expectational
relationship described by CAPM in active markets
such as the Philippine Stock Exchange. In case of
real corporate assets, such as plant and equipment,
research thus far has failed to prove the general
applicability of CAPM because of indivisibility,
relatively large size, limited number of
transactions, and absence of an efficient market for
such assets.
 Comments on CAPM
Despite the limitations of CAPM, it
provides a useful conceptual
framework for evaluating and
linking risk and return. An
awareness of this tradeoff and an
attempt to consider risk as well as
return in financial decision making
should help managers achieve
their goal.
Sources
End of Report