The cash flow at risk is a statistically determined key figure for risk assessment. The value at risk is only differentiated by the cash flow .
To calculate the cash flow at risk, a decomposition of cash flows must first be made. The factors that determine the cash flow are sales, cost of goods sold, marketing and administrative expenses, tax expenses and financial expenses. Planned or actual values must be specified for them. The standard deviation and the correlation coefficients must be evaluated for these factors. Historical data can hardly be used. Due to a dynamic environment with a constantly changing risk landscape, no solid data series are available. The estimation of the correlations is very difficult and complicated with a large number of influencing variables. The next step is to generate random numbers for each risk factor. This is done by means of the variance-covariance method and the Cholesky decomposition. On this basis, a Monte Carlo simulation is performed, which is used to generate a probability distribution. Finally, the cash flow at risk for individual safety levels can be determined with this distribution function.
wiki