Question

Explain in depth why financial knowledge of directors, especially knowledge of sophisticated risk management instrument, should add value to the firm, particularly in energy industry.

Answer 1

Financial knowledge of directors in a company is highly important in order to outperform the competitors because directors are the one who are important of making the important decisions at the strategic level and they should be capable enough to know about the the importance of different sophisticated financial instrument which can be used to manage their resource production and resource consumption.

directors of energy companies should be known to various kinds of instrument which are use to help their product because it can provide them with an enhanced strategic capability in order to manage their production and distribution patterns.

It could be exampled through director of an oil company who should be efficient enough to know about various types of forward and future hedge which can be used to limit the exposure through oil futures as he can better manage his profit through these sophisticated instruments.

this type of directors who are well known about the movement of financial instruments can enhance the profitability of the company to a large extent.