Risk management

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Risk management includes understanding what business and financial risks the company is exposed to, and then considering whether the returns generated are sufficient to justify taking those risks.

The risks need to be evaluated and assessed so that decisions can be made on whether to retain them, and if so whether to employ techniques to mitigate or transfer risks.

The underlying risks can be managed to limit risk. They can be hedged with counterbalancing exposures often created through the financial markets, or insurance taken out to protect the company’s financial health.

Risk management includes the management of:

  1. Business and operational risk
  2. Commodity risk
  3. Credit risk
  4. Exotic risk
  5. FX risk
  6. Interest rate risk
  7. Managing risk
  8. Pensions risk

One way of working with risk management is through a framework comprising:

- Identification

- Assessment

- Evaluation

- Response and

- Reporting

See also