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Risk Management Fundamentals

Risk Management Fundamentals. Statistics & Risk Management. Financial Risk Management. T he practice of creating economic value in a firm by using financial instruments to manage exposure to: C redit Risk M arket R isk. Organizational Context. What is the O rganization's Mission?

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Risk Management Fundamentals

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  1. Risk Management Fundamentals Statistics & Risk Management

  2. Financial Risk Management • The practice of creating economic value in a firm by using financial instruments to manage exposure to: • Credit Risk • Market Risk

  3. Organizational Context • What is the Organization's Mission? • Must address the problem of protecting itself against changes that can place the pursuit of this fundamental objective “at risk”.

  4. Identify Weaknesses • Do you have Specific Weaknesses? • Weak Management team • Cash Flow Issues • Over Budgeted Expenses • Work Force Shortages • Intense Competition

  5. Risks Inherent To: • External Context • Laws and regulations • Markets and competition • Operative Management • Contract compliance • Market share • Labor, skills, and personnel losses • Environmental factors • Financial Management • Account collections • Exchange Rates • Liquidity http://www.ewf.be/media/documentosDocs/doc_16_ewf-644-08-fundamentals-of-risk-management.pdf

  6. Identify Change • What is driving the change? • Opportunity • Government • Economy • Marketing • Financing

  7. Risks Consequences • Why Money Loss? • Revenue Falls Short • Escalating Expenses • Judgments, Fines, and Penalties • Security Breaches • Why Time Loss? • Limited Human Resources • Limited Expertise

  8. Calculate Probabilities Comparison within Organization Comparison within Industry

  9. Calculate Risk Likelihood of Change Seriousness of Consequences

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