Ivy Jan 04, 2017 No Comments
What is Risk?
Risk is the chance that an investment’s actual return will be different than expected. This includes the possibility of losing some or all of the original investment.
What is Risk Management?
Risk management is the process of identification, analysis and acceptance or mitigation of uncertainty in investment decisions. Essentially, risk management occurs any time an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given his investment objectives and risk tolerance.
Many companies now allocate large amounts of money and time in developing a risk management framework to help manage risks associated with their business and investment dealings
Goal of Risk management framework includes the following:
a. Ensure an institution’s trading, credit extension, and operational activities do not expose it to losses that could threaten the existence and ROI’s of the company
b. Risks cannot be avoided but one key objective of Risk Management is to ensure that the risks taken are consistent with the strategic risk tolerances set by senior management and the Board of Directors
Refernce: Investopedia.com
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