Risk management

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Risk management

The process of identifying and evaluating risks and selecting and managing techniques to adapt to risk exposures.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Risk Management

The process of identifying risks to an investment and, if possible, mitigating them. The first stage of risk management is determining the types and magnitudes of risk. For example, a risk manager might look at a bond and identify the possibility of default as a risk and evaluate the likelihood of that scenario. The second stage is taking steps to remedy risk, insofar as it is possible. In the above example, the risk manager might recommend buying other bonds to offset the risk of default on any single bond. Sometimes risk cannot be mitigated; in that case, risk managers evaluate how central the investment is to one's investment goals and risk tolerance. Generally speaking, investors seek the highest possible return at the lowest possible risk. Risk management helps them achieve this goal by showing how their investments may be affected and finding ways to alleviate the situation.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

Risk management.

Risk management is a set of strategies for analyzing potential risks and instituting policies and procedures to deal with them. The work of assessing the possibilities, setting priorities, and finding cost-effective solutions is also described as business continuity planning.

In a business environment, some risks, such as economic pressures or technology meltdowns, are universal while others are unique to a particular venture or physical location.

Large companies may use a combination of strategies to manage risk, including buying insurance, creating redundant systems, diversifying physical locations or core businesses, and establishing other hedges.

For an individual investor, risk can be managed in several ways: insuring at least a portion of your portfolio, allocating your assets across classes, diversifying your holdings, and hedging with derivative products.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.

risk management

A systematic approach to identifying insurable and noninsurable risks, evaluating the risk of loss versus the cost of insurance, and minimizing the possibility of loss through well-planned and regularly followed systems and procedures. Especially in construction, which typically has the very highest premiums for workers' compensation insurance, well-planned and well-executed risk management programs can result in significant savings on premiums.

The Complete Real Estate Encyclopedia by Denise L. Evans, JD & O. William Evans, JD. Copyright © 2007 by The McGraw-Hill Companies, Inc.
References in periodicals archive ?
The amounts of loss for each type of produce were calculated by multiplying per capita quantities available at each level by the corresponding food loss assumptions and by the US population on July 1, 2008 (304.06 million).
However, the rating agency notes that the bank's current capitalisation is pressured by low loan loss reserves (LLRs) coverage and further provisioning needs, resulting in a projected decline in the bank's capital adequacy metrics by around 8%-9% applying Moody's expected loss assumptions under central stress-test scenario.
Also, a sovereign downgrade may result in increased loss assumptions used for modelling, the agency added.
The bank financial strength ratings (BFSRs) of ACBA-Credit Agricole and Ardshininvestbank are unaffected as Moody's believes that their adequate capitalisation enables them to absorb a level of stress in line with current loss assumptions.
The underlying assumptions used to calculate the net present value (NPV) of residual assets include credit and loss assumptions, prepayment assumptions and an appropriate discount rate.
in expected loss assumptions, particularly for Slovak banks' junior
An unexpected increase in the delinquency or default rate as well as significant downward revision of Fitch's assumption of cash flow from the underlying properties may lead to higher loss assumptions, which may, in turn, affect the rating of the TBIs.
has revised the expected loss assumptions for non-real estate corporate
The resultant 'AAAsf' expected net loss assumptions for this review are 18.8% for both series, virtually unchanged from closing levels.
Hence, Fitch conducts sensitivity analyses by increasing the transaction's initial base case RV and credit loss assumptions and examining the rating implications on all classes of issued notes.