DEFINITION
Risk Management

"Risk management": Risk management is about understanding what business and financial risks the company is exposed to and 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, to employ techniques to mitigate or transfer risk. 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 risk2. Commodity risk3. Credit risk4. Exotic risk5. FX risk6. Interest rate risk7. Managing risk8. Pensions riskOne way of working with risk management is through a framework comprising: (i) Identification (ii) Assessment (iii) Evaluation (iv) Response and (v) Reporting
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