In the midwest of the United States, there is a small city called Omaha with a very famous investment tycoon. His name is Warren Buffett. You must have heard that this Mr Buffett is in charge of a lot of money. He holds an annual general meeting of shareholders every year. There are many shareholders, so there must be no room in the conference room. Thousands of people have to sit in the stadium. This shareholders' meeting brings a lot of people and cash flow to this small town every year and contributes a lot to the local economy.

Why did you mention Mr Buffett? Because he said, what is my goal as CEO of the company? My goal is to maximize the value of the shares held by all shareholders present and increase the value of the shares held by all shareholders.

Everyone understands this truth. Then, you may want to ask, Mr. Buffett, as a CEO, how do you maximize the value of your stock? The answer is not difficult, that is, invest in some products that are particularly profitable, with high profit margins and positive returns. However, to invest, you have to spend money. Then, the next question is, where does the money for this investment come from? Ok, now we are involved in risk management.

If you want to invest, you can borrow from the bank, pay interest to the bank, and face interest rate risk; Or if you borrow money from the open market, you can issue stocks or bonds in the open market. You will face a large number of investors, and you will have all kinds of transaction risks and transaction costs. Of course, you have a third option, which is to pay for it yourself.

What is the difference between borrowing money from banks, issuing bonds or stocks in the open market and taking money from your own pocket? In fact, the difference is the financing cost. This is the simplest, easiest and cheapest way to get money from your own pocket. If you are Mr Buffett and you have enough cash flow, you will definitely not go out to borrow money, whether in the bank or in the open market. Money in the pocket has the lowest risk and the lowest cost.

A company can invest if it has money in its pocket, and everything can be done smoothly. If there is no money in your pocket, the transaction cost is very considerable if you go to the open market for financing or go to the bank for loans.

So, the question is, how can I have money in my pocket? The goal of risk management is that I do risk management so that I can have enough cash flow in the future. My cash flow can be used in the projects I want to invest, and the return is very rich.

Why risk management? Simply put, it is to ensure the future cash flow, so that we can invest in the projects we want to invest in the future, and then I will increase the value of the stock.

Well, with this purpose, let's look at the following question. What are the risks?

What are the risks faced by an investor and an enterprise, and what kind of risks should we manage? Besides the interest rate risk mentioned above, what other risks do we have?