RISK (In Industrial Financing). - It deserves particular mention insofar as it dominates the basic phenomenon of the economy, namely the formation of savings (v.) and their transformation into productive capital.
With its growing frequency and gravity it in fact determines the prevalence of consumption for enjoyment over consumption for saving: and within the latter, the preference for speculative investments and for short-and very short-term investments, as against industrial investments, which are always long-term, but on which the security of employment and the spread of well-being essentially depend.
Risk in industrial financing takes three fundamental forms: investment risk, that is, partial or total loss of capital through the disruption of firms and radical changes in production systems or in consumers' tastes; immobilization risk, which prevents the recovery, without loss, of the availability of the invested capital when this is needed; and depreciation risk, the most feared and the most certain, which erodes capital, so that once disinvested it no longer buys what it bought at the moment of investment.
It may be said that every advance in economic-financial technique pursues, directly or indirectly, the aim of eliminating or reducing one or another of these risks: relying especially on the insurance-like distribution of risk (savings banks, land and building credit institutions, investment companies, holdings, trustees and the like), and on the perfection and agility of the securities market (stock exchanges, commodity exchanges, marketability of securities). Against depreciation risk, technique knows no specific remedy: because monetary depreciation (v.) is a complex phenomenon that must be countered in its remote causes: unproductive labor, interest (v.) on loans, and monetary disorder.
The attempts, numerous and incessant, aimed at eliminating or reducing risk in industrial financing must therefore rest not only on refinements of economic-financial technique, but also on a vast moral commitment involving the reform of customs, with a view to greater rationality in economic activities and to a more evident and practical economic solidarity among the nations of the world. The order and tranquility that would follow, together with seriousness in work, would constitute the favorable climate for a maximum formation of savings, for the most part convertible into new instruments of labor and new wealth for men.
BBL.: a true bbl. on the subject is lacking.
Mario Baronci