The fact is that financial risk is any risk that is closely associated with the matters of profitability and financial well-being of any company. The companies, which were involved in the risky financial operations may either succeed or experience total failure, as everything depends on the financial circumstances and actions performed by the management of the companies.
The first company that will be described is Urban Outfitters inc. Thus, as it is stated in Steinhauer:
“In 1993, Hayne opened two Urban Outfitters stores, in San Francisco and Costa Mesa. Originally, the store sales increased by 18 percent, and total sales exceeded the sales level of $500 for every square foot of the selling square.”
On the one hand, the risk was high enough, as San Francisco and Costa Mesa’s target audience is originally reluctant to buying the productions and goods, similar to those by Urban Outfitters, especially the goods of the high-class World War I-style leather bomber jacket.
Another company is the UBS AG. As Rappaport and Smith emphasize:
“Facing allegations of wrongdoing over its sales of so-called auction-rate securities, UBS AG agreed to buy back from investors nearly $19 billion of the investments as part of a settlement with federal and a group of state regulators. It will start buying from individuals and charities in October and from institutional clients in mid-2010.”
Investment is the action that is originally risky, independently of the financial circumstances. Nevertheless, the levels of the risks differ essentially. $19 billion of the bought-back investment may be regarded as financial assistance for the citizens. Nevertheless, this action may appear to be the total fiasco, and much more than $19 billion will be lost.
The third company, which requires the analysis from the perspective of financial risk, is Solara Inc. This company performed the exchange of a defective production openly, with extensive advertising. Surely, these actions resulted in increased expenses, and the company had to take a loan to cover these expenses. Nevertheless, the company has emphasized that the quality of the manufactured products is the matter of the highest priority for Solara Inc. The risk of this action is covered in the fact that some consumers became disappointed with the company and decided to change the supplier. Nevertheless, those, who decided to stay, ensured that they cared.