INTRODUCTION TO RISK MANAGEMENT

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 Effective risk selection and management are essential for company and investment success.
An effective risk management approach integrates an organization's objectives, strategic capabilities, and resources to provide value that will support its survival and growth.
In order to maximize value, managers must make better decisions and have a keener understanding of the numerous crucial trade-offs in business and investing. 

  1. The process of risk management involves defining a risk tolerance, measuring, monitoring, and modifying risks to stay within that tolerance. 
  2. For profitable company and investment practices, risk management is essential.
    Avoiding risk is just one aspect of risk management. 
  3. It consists of risk governance, risk identification and measurement, risk infrastructure, risk policies and processes, risk mitigation and management, communication, and strategic risk analysis and integration. A risk management framework is the infrastructure, processes, and analytics required to support effective risk management. 
  4. Boards of directors, management, investment managers, and people actively choose to take risks.
    Risks need to be comprehended, properly selected, and managed. 
  5. Risk exposure is the degree to which sensitivity to underlying risks may have an impact on an organization's value. 
  6. The highest level of risk management, encompassing risk oversight and determining the organization's risk tolerance, is known as risk governance. 
  7. The assessment of all potential risk sources and the organization's risk exposures using quantitative and qualitative methods is known as "risk identification and measurement." 
  8. The systems and tools needed to monitor and evaluate the risk profile of the organization make up the risk infrastructure. 
  9. The active monitoring and modifying of risk exposures while integrating all the other components of the risk management framework is known as risk mitigation and management. 
  10. Communication comprises risk reporting and ongoing feedback loops to enhance the decision-making process. 
  11. To ensure that the value of the entire organization is maximized, governance and the entire risk process should adopt an enterprise risk management viewpoint. 
  12. Any method of allocating investments or assets based on their risk characteristics is known as risk budgeting. 
  13. Risks related to money come from trading on the financial markets. 
  14. Non-financial risks can be caused by internal organizational decisions or external factors like the community, the environment, politicians, regulators, suppliers, and customers. 
  15. Market risk, credit risk, and liquidity risk are all types of financial hazards. 
  16. Changes in stock prices, interest rates, currency rates, and commodity prices all result in market risk. 
  17. The risk that a counterparty won't pay a debt is known as credit risk. 
  18. Liquidity risk is the possibility that one won't be able to sell an asset without having to reduce the price to below the asset's underlying worth due to deteriorating market conditions or a shortage of market players. 
  19. There are many hazards that fall under the category of non-financial risks, including operational risk, legal risk, regulatory risk, accounting risk, tax risk, model risk, and settlement risk. 
  20. Operational risk is a risk that can come from an organization's internal processes or from uncontrollable outside factors that have an impact on the organization's operations.
    Employees, the environment and natural disasters, IT system vulnerabilities, or terrorism can all contribute to operational risk. 
  21. Risk can be altered by risk transfer (insurance), risk shifting, and preventive and avoidance (derivatives). 
  22. Internal risk can be reduced by diversification or self-insurance. 
  23. Benefits vs costs, the overall final risk profile, and adherence to risk governance goals are the main factors that determine which strategy is appropriate for altering risk.

Comments

Anonymous said…
Really interesting
November 12, 2022 at 6:43 AM
AkiduGRIN said…
Thank you. Keep visiting our page for more educating
November 12, 2022 at 6:53 AM
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