Volume 22, No.1, 2025
Paper Critique: The Role Of Risk Analysis In Corporate Financial Decision-Making
Dr. Mahmoud Abdelrehim , Prof. Dr. Muzafar Shah Habibullah (Cross ponding Author)
Abstract
Risk analysis has become a critical component of corporate financial decision-making, especially in an increasingly volatile and complex financial environment. This paper provides a critique of the study by Smith et al. (2023), "Risk Analysis in Financial Decision-Making: Evidence from Corporate Strategies," which examines how firms integrate risk assessment frameworks to optimize financial performance. The study employs a panel data approach using the Difference Generalized Method of Moments (GMM) estimator to address endogeneity concerns and evaluate the impact of risk management strategies on return on assets (ROA), return on equity (ROE), and stock price volatility. Findings from Smith et al. (2023) suggest that firms employing advanced risk management tools, such as Monte Carlo simulations and Value-at-Risk (VaR) models, exhibit superior financial performance, particularly when risk assessments are conducted frequently. The study also highlights that firm size positively moderates the effectiveness of risk analysis frameworks, whereas industry volatility reduces the benefits of risk management strategies. However, this critique identifies several limitations, including the lack of qualitative insights, over-reliance on secondary data, and the exclusion of privately held firms and SMEs, which may limit the generalizability of the findings. Furthermore, emerging financial technologies such as artificial intelligence (AI) and blockchain are not considered in the study, despite their growing role in modern risk assessment practices.This critique underscores the need for future research to incorporate industry-specific risk management approaches, technological advancements, and behavioral finance perspectives. By addressing these gaps, scholars and practitioners can develop a more comprehensive and adaptive framework for corporate risk management, ensuring firms remain resilient in an era of heightened financial uncertainty.
Pages: 39-50
Keywords: Risk analysis has become a critical component of corporate financial decision-making, especially in an increasingly volatile and complex financial environment. This paper provides a critique of the study by Smith et al. (2023), "Risk Analysis in Financial