Finance School of management Risk-Management Process a systematic attempt to analyze and deal with risk Five steps Risk identification Risk assessment Selection of risk-management techniques Implementation Review uesTc
11 Finance School of Management Risk-Management Process A systematic attempt to analyze and deal with risk ❖ Five Steps – Risk identification – Risk assessment – Selection of risk-management techniques – Implementation – Review
Finance School of management Risk Identification Discover an entity's most important risk exposures view the entity as a whole Person career and stock market risk The net exposure to exchange-rate risk: buying inputs and selling products abroad Farmer: price risk and quantity risk uesTc 12
12 Finance School of Management Risk Identification Discover an entity’s most important risk exposures ❖ view the entity as a whole: – Person: career and stock market risk – The net exposure to exchange-rate risk: buying inputs and selling products abroad – Farmer: price risk and quantity risk
Finance School of management Risk assessment Quantifying risk exposures and costs of risks not trivial to do Health: insurance and actuaries Financial assets: professional investment advisors uesTc 13
13 Finance School of Management Risk Assessment Quantifying risk exposures and costs of risks ❖ Not trivial to do: – Health: insurance and actuaries – Financial assets: professional investment advisors