A risk measure (at risk measure) that reflects the extent to which future cash flows of an entity or a position/ investment may fall short of expected levels due to changes in market fundamentals such as price changes, cost structure changes, etc. Other drivers of such market variables include introduction of new products or geographies, acquisitions, or initiation of new projects. This risk measure generally focuses on the market risk that impacts corporate cash flows, downplaying factors such as political, operational, environmental and legal risk.

For example, if the future cash flow over the next 12 months is estimated at $1 million, and the forecasted cash flow at the 95th percentile is $700,000, then the cash flow at risk (CFaR) is $300,000 . This implies a 95 percent probability that the cash flow over the next year will be lower by $ 300,000, or alternatively a 5 percent probability it will be lower by more than $300,000.

This corporate risk measure provides information about the value of potential drops in cash flow in future periods and about the probability with which those drops will exceed or not exceed that value.