The Role of VaR in Enterprise Risk Management
role of VaR in Enterprise Risk Management: (Note: There is an excel
template attached that should be analyzed for this case study)
White is the CFO of a $46 million revenue service company and has
excess cash funds to invest into a specific stock. Based upon his
research, he has found that Starbucks is an excellent choice for several
reasons, including a current stock beta of .64 (which means that the
risk is low as it is below a threshold of 1.00). However, he wishes to
use the VaR calculation to quantify the upside and downside risk to the
company to help him recognize if Starbucks stock is a good choice.
Please see below for the assignment parameters.
Based upon the findings in the spreadsheet attached, please use Word to answer:
are your findings of Starbucks VaR benchmarks and what do they mean?
b. Please explain what you would advise Mr. White to do in terms
of his choice of Starbucks investment for the company.
c. What should he
explain to the CEO as to possible risk impact on the company?
-Textbook Attached – Chapter 24 (pg 489-501)