The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. primarily, risk management happens associate degree time associate degree capitalist or fund manager analyzes and makes an attempt to quantify the potential for losses in an investment then takes the acceptable action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management may result in severe consequences for firms further as people. for instance, the recession that began in 2008 was for the most part caused by the loose credit risk management of monetary corporations.
Simply put, risk management could be a ballroom dancing method - deciding what risks exist in an exceeding investment so handling those risks in a method best-suited to your investment objectives. Risk management happens all over within the money world. It happens once associate capitalist buys low-risk government bonds over a lot of risky company debt, once a fund manager hedges their currency exposure with currency derivatives and once a bank performs a credit check on a private before supplying them a private line of credit.
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