Risk can be both a threat to a company’s financial health and an opportunity to get ahead of the competition. Most analysts, when referring to risk management, focus on the threat and emphasize protecting against that threat (i.e., risk hedging). The risk associated with an investment is generally reflected in the discount rate used in conventional discounted cash flow models, and because analysts also assume that only market risk affects discount rates, the firms that spend time and resources on hedging company-specific risk may well lose value. But risk management can increase firm value—by altering investment policy and creating competitive advantages, which can have consequences for expected growth rates and excess returns.