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 development of supervisory guidance on sound risk management, like industry practices, is an evolutionary process enhanced by experience.
Although different supervisors start from different bases of existing guidance, we believe the current body of Federal Reserve guidance on the risk management of trading, derivatives, and other capital markets activities is entirely consistent with that issued over the years by the Basle Committee on Bank Supervision and by other U.S.
Perhaps the most important guidance emphasized by the Federal Reserve and the OCC is that which advises banks and examiners to ensure that sufficient risk management is targeted at new, growing, and highly profitable activities.

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