Raison D’être of Risk Management

In order to understand the need for risk management it is necessary to look at the different building blocks of a holistic risk management. Figure 1.1 tries to decompose the risk management into its generic components. The overall aim is to manage the risks a company is facing.

It’s been said that death and taxes are the only certain things in life. Income tax – on all levels – is the government’s chief means of generating revenue. It is also the most complex of all subjects, due to confusing law verbiage and the vastness of the Internal Revenue Service Code which never seems to decrease in volume.

Investing in the stock market can be financially rewarding. It can also be risky. A basic understanding of stocks is vital if an individual hopes to successfully navigate the complexities of investing.

Savings for some future event, at its most basic level, is the disciplined act is putting money in some vehicle that will give a return on one’s investment. It can be as simple as a savings passbook account or CD, or as complex as bonds, notes and mortgages. The more complex the vehicle, the more the return and risk vary.

Let's look into the institutional arrangements for equity trading. After all, from our corporate perspective, stocks are more interesting than many other financial instruments, such as foreign government bonds, even if there is more money in foreign government bonds than in corporate equity.

Page 3 of 4

Back to Top