Original Research

Internal risk financing with special reference to contingency funds

F. J. Mostert
South African Journal of Economic and Management Sciences | Vol 6, No 2 | a3314 | DOI: https://doi.org/10.4102/sajems.v6i2.3314 | © 2019 F. J. Mostert | This work is licensed under CC Attribution 4.0
Submitted: 31 July 2019 | Published: 30 June 2003

About the author(s)

F. J. Mostert, Department of Business Management, University of Stellenbosch, South Africa

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Enterprises can manage risks in two fundamental ways, namely by physical risk control and by risk financing. The latter comprises external and internal risk financing. As this paper focuses on the latter of these concepts, due attention is paid to the main forms of internal risk financing. Charging losses to current operating profit, arranging loan facilities and implementing equity financing programmes are different forms of internal risk financing. The nature, advantages and various types of captive insurance companies are considered as holding companies can utilise this form of internal risk financing. Special attention is paid to the use of contingency funds as a way of internal risk financing by applying a modelling approach. The conclusions reached should be valuable to business enterprises in particular, but also to non-profit organisations and individuals.


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Crossref Citations

1. Risk financing for capital investments to enhance shareholders’ value
Cornel Stander, Jan Hendrik Mostert, Frederik J. Mostert
Corporate Ownership and Control  vol: 7  issue: 1  first page: 385  year: 2009  
doi: 10.22495/cocv7i1c3p5