The Role of Financial Management and Liquidity Theories in Enhancing Investment Risk Mitigation

Abstract

Financial management plays a strategic role in sustaining corporate continuity amid global economic uncertainty. Effective financial performance is not solely determined by revenue growth but also by the capacity to manage liquidity, investment risk, and efficient utilization of resources. This study aims to examine the interrelationship between financial management, liquidity theory, and investment risk management strategies. A qualitative descriptive approach is employed to illustrate the practical application of liquidity theories, including shiftability theory and Moulton’s theory, within the framework of Basel III regulations and their implications for corporate financial stability. The findings indicate that integrating financial policies with investment risk mitigation constitutes a critical factor in maintaining healthy cash flows, enhancing shareholder value, and strengthening business resilience against economic shocks. Furthermore, the study emphasizes the importance of adopting financial technology innovations and portfolio diversification to reinforce managerial resilience and support strategic decision-making in dynamic market conditions. These insights contribute to a deeper understanding of how financial management and risk strategies collectively promote long-term organizational sustainability.