The process of analysis, identification and mitigation of uncertainty in investment decision-making. The Economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events. The Risk Management occurs anytime an investor or fund attempts to quantify the potential for losses in an investment and then takes the appropriate action.
Once risks have been identified, they must then be assessed as to their potential severity of impact and to the probability of occurrence. These quantities can be either simple to measure, in the case of the value of a lost building, or impossible to know for sure in the case of the probability of an unlikely event occurring. Therefore, in the assessment process it is critical to make the best educated decisions in order to properly prioritize the implementation of the risk management plan.
The main difficulty in risk assessment is determining the rate of occurrence since statistical information is not available on all kinds of past incidents. Furthermore, evaluating the severity of the consequences is often quite difficult for intangible assets. Asset valuation is another question that needs to be addressed. Thus, Perfect decisions and available statistics are the primary sources of information.
Risk assessment should produce such information for the management of the organization that the primary risks are easy to understand and that the risk management decisions may be prioritized. Thus, there have been several theories and attempts to quantify risks.
The process of analysis,
identification and mitigation of uncertainty in investment decision-making. The Economical application of resources
to minimize, monitor, and control the probability and/or impact of unfortunate
events. The Risk Management occurs anytime an investor or fund attempts to quantify the potential for
losses in an investment and then takes the appropriate action.
Once risks have been identified, they must then
be assessed as to their potential severity of impact and to the probability of
occurrence. These quantities can be either simple to measure, in the case of
the value of a lost building, or impossible to know for sure in the case of the
probability of an unlikely event occurring. Therefore, in the assessment
process it is critical to make the best educated decisions in order to properly
prioritize the implementation of the risk management plan.
The main difficulty in risk assessment is
determining the rate of occurrence since statistical information is not
available on all kinds of past incidents. Furthermore, evaluating the severity
of the consequences is often quite difficult for intangible assets. Asset
valuation is another question that needs to be addressed. Thus, Perfect
decisions and available statistics are the primary sources of information.
Risk assessment should produce such information
for the management of the organization that the primary risks are easy to
understand and that the risk management decisions may be prioritized. Thus,
there have been several theories and attempts to quantify risks.
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