the possibility of suffering damage or loss in the face of uncertainty about the outcome of actions, future events, or circumstances. Organizations are exposed to various types of risk, including damage to property, injury to personnel, financial loss, and legal liability. These may affect profitability, hinder the achievement of objectives, or lead to business interruption or failure. Risk may be deemed high or low, depending on the probability of an adverse outcome. Risks that can be quantified on the basis of past experience are insurable and those that cannot be calculated are uninsurable.
a condition in which there exists a quantifiable dispersion in the possible outcomes from any activity
Wiktionary Definition for: Risk
A possible, usually negative, outcome, e.g., a danger.
The likelihood of a negative outcome.
italbrac Formal use in business, engineering, etc. The potential (conventionally negative) impact of an event, determined by combining the likelihood of the event occurring with the impact should it occur.
Risk is a term that is bandied about almost casually in the financial media. This should come as no surprise. Risk and the management of risk are at the core of investment success. Without a solid understanding of risk and the principles for mitigating it, one might as well be...
Risk ranking is a common methodology for making risk based decisions without conducting quantitative risk analysis. The basis for risk ranking is the risk matrix that has both a consequence and frequency axis. The product of consequence and frequency provides a measure of risk. Each consequence /frequency pair on the...
Corporate risk comes in many guises from the smallest of pitfalls, which at worst might cause an organization expense or embarrassment, to outright disasters - the result of which can be catastrophic. The article explains what measures can be taken to reduce and manage risk. The discussion advances to describing...
In many cases, the payout from an insurance-linked security is tied to some stochastic variable, an index, which is correlated, but not identical, with the insured's actual losses. Therefore, such an instrument will usually not provide a perfect hedge. There will be some mismatch, the so-called basis risk. This paper...
This article talks about the types of risk and different measures to minimize these kind of risks. While investing for retirement, first impulse is to choose the "safest" investment for savings plan and after that measures that can help to make sure that money will be there for future. However,...
Today, management frequently comes up with questions on how one should handle a perceived risk. Marketing comes almost to every one of their promotions to see if there is anything out of the ordinary associated with it. According to this article managers need to discuss the future of risk management,...
Every risk offers a choice: the risk of action and the risk of inaction. If a risk is right, the real harm comes in letting the opportunity pass by. This paper offers suggestions for becoming more comfortable taking risks and how to push yourself to do so.
This article is related to credit risk management. Credit risk is most simply defined as the potential that a bank borrower or counterpart will fail to meet its obligations in accordance with agreed terms. The goal of credit risk management is to maximize a bank’s risk-adjusted rate of return by...
In the financial world there is a conundrum with terrorism alternative risk transfer ART arising from the ambiguity in risk evaluation. An ART deal may be given a neat quantitative risk label but buyers may suspect that the real risk is quite different. Risk analysts need to convince potential ART...
Investors have begun to focus on risk dollars spent to achieve return. The increasing trend to focus on reward and risk at the instrument, manager and overall portfolio level has resulted in a need to ensure that compensation and fees encourage the type of risk-taking that the primary fiduciary desires....
In this paper, we explain how enterprise risk management creates value for shareholders. In contrast to the existing finance literature, we emphasize the organizational benefits of risk management. We show how a firm should choose its risk appetite and measure risk when implementing enterprise risk management. We also provide an...
Risk is inevitable. But with the Insurance Institute of America's Associate in Risk Management ARM designation program, risk management professionals can gain the practical skills they need to understand risk and manage it well. ARM fully integrates the key elements of risk assessment, risk control and risk financing in a...
In recent years, a new type of financial instruments has appeared on financial markets. Even though they have all the features of financial contracts, they are very different from the classical structures. Their underlying risk is indeed related to a non-financial risk (natural catastrophe, weather event...), which may somehow be...
All organizations face some amount of risk, but very few try to curb them. It is better that an organization controls risks as and when they occur, rather than delay the process. The delay in controlling the risk will culminate into a bigger risk, which might be beyond anyone’s control....
The risk management landscape has changed dramatically over recent times, fuelled by the meteoric rise in litigation, greater regulatory control, the impact of corporate governance, and the changing practices towards self-retention and transfer of risk. A RMIS demonstrates commitment on the part of the risk manager to better understand and...
Risks are also hardly static entities and constantly mutate to changing project conditions. Risk monitoring and control will help ensure that you are able to keep up these changes by constantly monitoring risks to discover changes in the impact of identified risks. The results of your risk monitoring and control...
The major focus of this document is to show that asset and liability management can be performed on a fully integrated basis within a correct and efficient enterprise risk management framework, a framework that can deal with interest rate risk, foreign exchange risk, market risk, credit risk, and operational risk...
Risk is not a four-letter word – risk becomes a problem when it is unintended, misunderstood or uncompensated. One cannot make money without taking risk. The goal of risk management is to insure that the balance between risk and reward is in proportion. The article distinguishes between the risk and...
Some have argued that recent increases in credit risk transfer are desirable because they improve the diversification of risk. Others have suggested that they may be undesirable if they increase the risk of financial crises. Using a model with banking and insurance sectors, this paper shows that credit risk transfer...
Since, nobody can clearly see into the future, achieving an accurate assessment of risk and its related expected returns is a cornerstone of prudent investing. But first it is important to define what exactly is meant by “risk.” Risk takes on many guises and can be different things to different...
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