Risk management can best be described as identifying, assessing, prioritizing and accepting or mitigating any forms of uncertainties in an investment decision. Initially, this process is carried out when a potential investor is trying to quantify his potential to garner losses from an investment so that he or she can take appropriate actions.
There are many risks to investment. They may be in form of financial risks, perimeter risks operational risks or even strategic risks. Although accidental risks are not foreseen and thus cannot be planned for, there are techniques that you can use to ensure that these events are more predictable. The more predictable you make an event, the less likely it will catch you unprepared.
The key to efficient management of risks is having control over the risk management functions, ensuring that the actions you perform are effective, necessary and desirable so as to reduce the overall risk. To mitigate risk, you may use a number of techniques.
One of these techniques includes avoiding activities that may cause loss. You may also choose to reduce the frequency or the severity of the losses you face. If that does not work, you can try contractual transfer of responsibility for the occurrence of losses.