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.

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.

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.

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.

References in periodicals archive ?
Performance assumptions for each model and term combination were weighted according to the composition of the pool, resulting in a 'BBsf' residual value loss assumption of 18.
A moderate stress to the 'BBsf' residual loss assumption (an increase to 25%) would likely result in a negative rating action of approximately one rating category for the notes (to 'Asf').
Along with the final rating revisions of the classes currently on Rating Watch Negative, Fitch will publish revised mortgage pool loss assumptions and class recovery amounts.
Along with the final rating revisions of the classes currently on Rating Watch Negative, Fitch will publish pool-level revised loss assumptions and bond-level recovery estimates.
The performance of the mortgage pools underlying Bayview Financial Asset Trust 2004-SSR1 has been worse than expected and resulted in increased loss assumptions.
After determining each underlying mortgage pools' projected base-case and stressed scenario loss assumptions, Fitch performs cash flow analysis to ascertain the amount of bond recovery and loss that the Re-REMIC classes take in the 'AAA-B' rating stresses.
After determining the underlying pools' projected base-case and stressed scenario loss assumptions, Fitch performed cash flow analysis to ascertain the amount of collateral loss each class could sustain.
As the transaction continues to amortize, Fitch expects residual and credit loss coverage to improve resulting in the subordinate notes being able to withstand higher loss assumptions.
Based on Fitch's analysis which incorporates an increase in net losses due to the potential bankruptcy of CIT, lifetime collateral losses are expected to be below Fitch's original net loss assumption.