What is Financial Risk Management
Risk management is the process to identify, analyse, and mitigate or accept insecurity. Basically, risk management is essential when a financier or fund manager evaluates and endeavours to measure the loss potential in an investment, and takes suitable action to avoid or mitigate the risk. Risk management involves risk assessment in financial terms. It occurs when a fund manager buys government bonds with low risk, compared to corporate bonds, which have more risk.
Stockbrokers use futures, and money managers use diversification of portfolio and investment, to efficiently conduct risk management. Enterprise risk management involves continuous risk assessment and risk management, to prevent losses, and capture all opportunities. An enterprise may avoid risk, retain risk, or transfer risk, as risk management measures.