What are the main contents of risk management?

Risk management includes the measurement, assessment and response strategy of risk. Ideal risk management is a process of prioritizing those that can cause the greatest losses and the most likely to occur, while those that are relatively less risky are deferred.

In reality, the optimization process is often difficult to decide, because the risks and likelihoods of occurrence are often not aligned, so it is necessary to weigh the two in order to make the most appropriate decision.

Risk management also faces the challenge of efficient use of resources. This involves an opportunity cost factor. The allocation of resources to risk management may lead to a reduction in resources available for rewarding activities; Ideal risk management is to be able to spend the least amount of resources to resolve the biggest crisis possible.

Risk Management" was a compulsory subject for executives in the Western business community who traveled to China to invest in China in the 1990s. At that time, many MBA courses added an additional "risk management" component.

Risk management

The process of weighing the benefits and costs of reducing risk and deciding what measures to take.

The process of determining the trade-off of the cost-benefit reductions and deciding on the action plan to take, including the decision not to take any action, is called risk management.

First, risk management must identify risks. Risk identification is the process of determining what kind of risks are likely to have an impact on the business, and most importantly quantifying the degree of uncertainty and the extent to which each risk is likely to cause losses.

Secondly, risk management should focus on risk control, and companies usually adopt proactive measures to control risks. The purpose of control is achieved by reducing the probability of its loss and reducing the degree of its loss. The most effective way to control risk is to develop a practical contingency plan and prepare multiple alternatives to maximize the company's preparedness for the risks it faces.

When a risk occurs, it can be implemented according to the pre-planned plan to minimize the loss.

Thirdly, risk management should learn to avoid risks. Under the condition that the established goals remain unchanged, change the implementation path of the plan to fundamentally eliminate specific risk factors. For example, the establishment of modern incentive mechanisms, training programs, and talent backup work can reduce the risk of knowledge staff loss.

1. Market risk:

Market risks mainly focus on the impact of changes in interest rates, exchange rates, stock prices, etc. on corporate assets.

2. Credit risk:

If the business partner of the enterprise is unable to repay the payment, or goes bankrupt, it is unable to repay the loan in full and on time.

3. Liquidity risk:

Liquidity risk mainly refers to the liquidity risk of funds, such as liability management, asset liquidity, etc.

4. Operational risk:

Risks caused by poor operating systems and negligent operations, such as poor or contradictory process design, omissions in operation execution, and failure to implement internal control.

5. Legal risks:

Risks that may arise from contracts signed between enterprises and other people or institutions, such as foreign language contracts, contract loopholes, etc.

6. Accounting risk:

Accounting treatment and tax risks that may arise from the profit and loss of the enterprise, such as the appropriateness and legality of the accounting treatment, and whether the tax consultation and treatment are complete.

7. Information risk:

Improper security control, operation and redundancy of the information system lead to enterprise risks, such as system failure, crash, data destruction, security protection or computer virus prevention and treatment.

What are the four steps of risk management.

A risk management system refers to the set of elements in an organization's management system that are related to managing risk. It includes four aspects: risk management strategy, organizational function system, internal control system and risk management measures. Get free preparation materials for the 2022 FRM (trial course + past papers + exam syllabus, etc.).

The four steps of risk management are: risk identification, risk analysis, risk response, and risk monitoring.

Risk management approach.

1) Risk avoidance.

2) Risk prevention.

3) Self-retention risk.

4) Transfer of risk. Click here for a free consultation with FRM Masters.

Risk management includes risk identification, risk estimation, risk evaluation, risk control and management effect evaluation.

1) Risk identification.

Risk identification refers to the process of judging, classifying and identifying the nature of risks faced by enterprises and potential risks. It mainly includes two aspects: risk perception and risk analysis. Commonly used methods include insurance investigation method, financial analysis method, enterprise production flow chart method, field investigation method and loss analysis method.

2) Risk estimation.

Risk estimation is based on risk identification, through the analysis of a large number of detailed loss data collected, and the use of probability theory and mathematical statistics to estimate and measure the probability of risk occurrence and loss degree. Risk estimation not only makes risk management based on science, but also quantifies risk analysis.

3) Risk assessment.

Risk assessment refers to the probability of risk occurrence and the severity of loss on the basis of risk identification and risk estimation, combined with other factors, to obtain the possibility of systematic risk and its degree of harm, and compare with recognized safety indicators to determine the risk level of the system, and then according to the risk level of the system, decide whether control measures are needed, and to what extent the control measures are taken.

Specifically, it includes determining the probability and chances that losses will occur, determining the impact that these losses might have on businesses or households if they occur, and determining the ability to afford losses to occur within a budget.

4) Based on the results of the risk assessment, select and implement the best risk management technology to achieve the risk management objectives.

There are often two categories: control type and financial type. The purpose of the control type is to reduce the frequency and magnitude of losses, focusing on changing the various conditions that cause accidents and expand losses; The purpose of the financial type is to absorb the cost of the loss in a way that provides the best of the best, that is, the financial arrangement made for the risk that cannot be controlled.

5) Evaluation of risk management effect.

Risk management effectiveness evaluation refers to the analysis, inspection, correction and evaluation of the applicability and profitability of risk management techniques. The magnitude of risk management benefits depends on whether maximum security can be achieved with the least risk cost. At the same time, in practice, it is necessary to consider whether it is consistent with the overall management objectives, and also consider the possibility, operability and effectiveness of specific implementation.

Risk management. The goal is to minimize the cost of risk and maximize the value of the enterprise.

Specifically, for each entity, such as a business unit of a financial institution, the goal is to avoid risks that it does not want to take and control the risks that it must assume in its operations.

Within a certain level. This level can be determined by its internal business objectives or by external constraints. The former includes its profitability and risk metrics, such as raroc, var, exposure stress limit, and the latter includes regulatory and compliance constraints, such as capital rwa.

Because the degree of risk-taking must be consistent with its business objectives, taking risks first is a necessary condition for making a profit, for example, banks must bear the risk of default in order to earn interest on loans, and the duration of loans is long-term and short-term.

Mismatched liquidity risk, brokers must bear the market risk of positions to earn trading commissions, and so on. However, for risks outside the business operation, or risks that lack sufficient regulatory and management means, they need to be transferred to avoid them.

Hello dear. The content of enterprise risk management mainly includes: 1. Enterprise risk identification: enterprise risk identification is a basic work in risk analysis and management, and its main task is to clarify the existence of enterprise risks, and find the main risk factors, so as to lay the foundation for subsequent risk measurement and risk decision-making.

2. Enterprise risk measurement: After the risk identification, the enterprise risk must be measured in order to determine the severity of its impact on the development of the enterprise and take corresponding measures, which is actually to use a certain method to estimate and measure the possibility of risk occurrence or the scope and degree of loss. 3. Enterprise risk treatment:

Enterprise risk treatment is to take corresponding countermeasures, measures or methods for different types, scales and probabilities of internal and external risks of enterprises, so as to minimize the impact of risk losses on the production and operation activities of enterprises.

2. Roles and responsibilities: Determine the composition of the leadership, support and risk management team for each activity in the risk management plan, assign personnel to these roles and clarify their responsibilities;

3. Budget: allocate resources and estimate the cost of risk management, which will be included in the project cost baseline;

4. Develop a timeline: determine the number and frequency of the implementation of the risk management process throughout the life cycle of the project, and identify the risk management activities that should be included in the project schedule;

5. Risk classification: Before the risk identification process, the risk category is reviewed in the risk management planning process;

6. Definition of risk probability and impact: In order to ensure the quality and credibility of the risk qualitative analysis process, it is required to define different levels of risk probability and impact.

7. Probability and Impact Matrix: Prioritize risks based on their potential impact on achieving project objectives. A typical approach to risk prioritization is to borrow a comparison table or a probability and impact matrix form.

It is often up to the organization to define which combinations of risk probabilities and impacts are of high, medium, or low importance, and to determine the appropriate risk response plan.

8. Revised stakeholder tolerance: The stakeholder tolerance level can be revised in the process of risk management planning to apply to specific projects;

9. Reporting format: Describe the content and format of the risk register, as well as any other risk reports required, and define how to record, analyze and communicate the results of the risk management process;

10. Tracking: Explain how to capture all aspects of risk activities for use in current projects, or to meet future needs or the needs of the lessons learned process, and explain whether and how to audit the risk management process.

Risk management is to consider the management of various risks, such as capital risk and factory production risk.

: Definition of Risk Management Risk management includes the measurement, assessment and contingency strategy of risk. Ideal risk management is a series of prioritization processes.

Personally, I feel that risk management includes a lot, such as property.