Erosion

Erosion can include any negative impact on a company’s associated assets or funds. Erosion can be experienced with regard to profits, sales, or tangible assets, such as manufacturing equipment. Erosion is often considered a general risk factor within an organization’s cash management system, as the losses may be slow and occurring over time. Erosion can also occur with certain financial assets, such as options contracts or warrants that decline in value as time passes–known as time decay. Erosion generally applies to longer-term downward trends in a company’s business; short-term losses are usually not considered erosion.