What Is Risk Management in Finance, and Why Is It Important?
What Is Financial Risk Management?
Financial risk management involves identifying the potential downsides in any investment decision and deciding whether to accept the risks or take measures to mitigate them. Financial risk management is a continuing process as risks can change over time.
There are risks in all investments. Successful financial risk management requires a balance between potential risks and potential rewards.
Key Takeaways
- Risk management is the process of identifying the potential downsides as well as the potential rewards of an investment.
- Balancing risk and reward is a crucial process in any investment decision.
- Risk management strategies include avoidance, retention, sharing, transferring, and loss…
