Defining Risk Management

There is some risk in just about all of our activities – risk is about uncertainty. It is the chance of loss or adverse outcome. Exposure to risk is something that organizations can actively control within a risk management framework and is an integral part of the portfolio management process.

Institutional Risk Management

Institutional risk management can apply to the enterprise as a whole as well as a financial market portfolio. Managers may not be able to control the outcomes, but they can choose which risks to take in the pursuit of those outcomes through the careful allocation and management of scarce resources.

Individual Risk Management

Individuals often practice risk management in an informal or unstructured manner. They do not view risk management as a systematic process that can help to achieve financial goals or to use the economics terms, maximize utility.

Reading 42 LOS 42a:

Define risk management

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