Finance School of Management The Risk-Management Process a systematic attempt to analyze and deal with risk Steps Risk identification Risk assessment Selection of risk-management techniques Implementation ReⅤiew uesTc
11 Finance School of Management The Risk-Management Process ❖ A systematic attempt to analyze and deal with risk ❖ Steps – Risk identification – Risk assessment – Selection of risk-management techniques – Implementation – Review
Finance School of Management Risk Identification Figuring out what the most important risk exposures are for the unity of analysis go The perspective of the entity as a whole Career and stock-market risk The net exposure to exchange-rate risk of a firm buying inputs and selling products abroad Price risk and quantity risk oI farms uesTc 12
12 Finance School of Management Risk Identification ❖ Figuring out what the most important risk exposures are for the unity of analysis. ❖ The perspective of the entity as a whole – Career and stock-market risk – The net exposure to exchange-rate risk of a firm buying inputs and selling products abroad – Price risk and quantity risk of farms
Finance School of Management Risk assessment The quantification of the costs associated with the risks that have been identified Health-insurance and actuaries Professional investment advisors uesTc 13
13 Finance School of Management Risk Assessment ❖ The quantification of the costs associated with the risks that have been identified ❖ Health-insurance and actuaries ❖ Professional investment advisors
Finance School of Management Risk-Management Techniques Risk avoidance Loss prevention and control Risk retention Risk transfer uesTc 14
14 Finance School of Management Risk-Management Techniques ❖ Risk avoidance ❖ Loss prevention and control ❖ Risk retention ❖ Risk transfer
Finance School of Management Implementation he basic principle is to minimize the costs of Implementation The lowest premium for health insurance The costs of investing in the stock market through mutual fund or a broker uesTc 15
15 Finance School of Management Implementation ❖ The basic principle is to minimize the costs of implementation. – The lowest premium for health insurance – The costs of investing in the stock market through mutual fund or a broker