Skip to main content

What is Risk Management?

Risk is a part of our life, at every step we are overshadowed by various risks as each activity we do during the day involves some level of risk. It is a condition where there is a possibility of hazard from the desired outcome that is expected. For those who define risk as uncertainty, the greater the uncertainty, the greater is the risk. In other words, higher the probability of loss, greater is the probability of an adverse deviation from what is hoped for and therefore, greater is the risk.

However, these adverse effects or risks can be controlled and avoided through proper risk management. In other words, risk management involves identification, analysis and controlling risks which can threaten our life and assets.

Steps in Risk Management

Risk management involves various steps, which have to be taken into consideration in order to eradicate risk.

  • Identification of Risk

The first step in risk management is the identification of risk. Risk are events that causes problems, therefore it is essential to get to the root of risk. Risk identification must be recognized as the most important step as it involves digging into the source of risk which may be internal or external.

  • Risk Analysis

Once the risks have been identified, the next step is to analyse and measure that risks. Further, it is essential to study the risk and the hazard that an individual is exposed to.

  • Risk Assessment

Risks can be assessed depending upon the following factors:

a) Frequency of risk
b) Financial severity
c) Impact of the risk

Risk assessment involves measuring the frequency of occurrence of risk and the loss that it would result in. Some risks require prior attention to others depending upon the severity they would cause.

Dealing with Risks

We all are exposed to risks at all times, while travelling, while working, while driving, etc. Its just that some risks are more severe than others. Financial risks can be treated by the following four methods:

  • Avoiding Risk

The first step in risk management is to avoid the risk. This can be done by not undertaking activities that might cause risk. Like avoiding the risk of financial loss by not investing in the stock market. Despite being beneficial to manage risks, avoiding them would also mean avoiding the opportunities accompanied by a task.

  • Controlling Risk

Once the risk has conquered, the best method is to control the risk in order to avoid excessive loss that might be caused. For example, installing sprinklers and fire extinguishers in a petrol station, to control the loss that fire can cause.

  • Retaining Risk

The third step in risk management is retaining or accepting the risk. Risks that cannot be avoided are usually accepted. Self insurance is a method of accepting risks. A perfect example of this is life insurance. We cannot avoid risk to our life but accept the risks that we are exposed to. We cover ourselves in order to reduce these risks.

  • Transferring Risk

The fourth and the most commonly practiced method of dealing with risk is to transfer it. This refers to shifting the responsibility of the loss to another party. It is usually done by purchasing an insurance policy. It is a contract where the insurance company does not take over the risk but compensates certain percentage of the loss incurred by the risk. Thus, risk management involves identifying the risk and taking effective measures in order to control or reduce it.

 

-----------------------------------------------------------------

 

Also, know how to buy mutual funds online:

 

Invest in DSP BlackRock Mutual Funds Online

 

Invest in Reliance Mutual Funds Online

 

Invest in HDFC Mutual Funds Online

 

Invest in Sundaram Mutual Funds Online

 

Invest in Birla Sunlife Mutual Funds Online

 

Invest in IDFC Mutual Funds Online

 

Invest in UTI Mutual Funds Online

  

Invest in SBI Mutual Funds Online

 

Invest in L&T Mutual Funds Online

 

Invest in Edelweiss Mutual Funds Online

 

Popular posts from this blog

National Savings Certificate

National Savings Certificate Here's everything you need to know about the 5-year savings scheme offered by the Government This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks. What's on offer The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable. You can invest in multiples of Rs 100. These certificates can be owned individually, jointly and also on behalf of minors. The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along w...
Read more

Am you Required to E-file Tax Return?

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   Am I Required to 'E-file' My Return? Yes, under the law you are required to e-file your return if your income for the year is Rs. 500,000 or more. Even if you are not required to e-file your return, it is advisable to do so for the following benefits: i) E-filing is environment friendly. ii) E-filing ensures certain validations before the return is filed. Therefore, e-returns are more accurate than the paper returns. iii) E-returns are processed faster than the paper returns. iv) E-filing can be done from the comfort of home/office and you do not have to stand in queue to e-file. v) E-returns can be accessed anytime from the tax department's e-filing portal. For further information contact Prajna Capit...
Read more

Mutual Fund Review: HDFC Index Sensex Plus

  In terms of size, HDFC Index Sensex Plus may be one of the smallest offerings from the HDFC stable. But that has not dampened its show, which has beaten the Sensex by a mile in overall returns   HDFC Index Sensex Plus is a passively managed diversified equity scheme with Sensex as its benchmark index. The fund also invests a small proportion of its equity portfolio in non-Sensex scrips. The scheme cannot boast of an impressive size and is one of the smallest in the HDFC basket with assets under management (AUM) of less than 60 crore. PERFORMANCE: Being passively managed and portfolio aligned to that of the benchmark, the performance of the index fund is expected to follow that of the benchmark and in this respect, it has not disappointed investors. Since its launch in July 2002, the fund has outperformed Sensex in overall returns by good margins.    While every 1,000 invested in HDFC Index Sensex Plus in July 2002 is worth 6,130 now, a similar amount invested in Sensex then wo...
Read more

Different types of Mutual Funds

You may not be comfortable investing in the stock market. It might not seem like your cup of tea. But you can start by investing in Mutual Funds. Many first-time investors invest in Mutual Funds. This is because they do not know how to invest in individual securities. Basic information on Mutual Funds People invest their money in stocks, bonds, and other securities through Mutual Funds. Each Fund has different schemes with specific objectives. Professional Fund Managers look after these schemes. Your Fund Manager could help you invest in a scheme that suits your financial goal. Functioning of Mutual Funds You could make money through Mutual Funds in different ways. A single Mutual Fund could hold many different stocks, bonds, and debentures. This minimizes the risk by spreading out your investment. You could earn dividends from stocks and interest from bonds. You could also earn capital by selling securities when their price increases. Usually, you could choose to sell your share any t...
Read more

IDFC - Long term infrastructure bonds - Tranche 2

IDFC - Long term infrastructure bonds What are infrastructure bonds? In 2010, the government introduced a new section 80CCF under the Income Tax Act, 1961 (" Income Tax Act ") to provide for income tax deductions for subscription to long-term infrastructure bonds and pursuant to that the Central Board of Direct Taxes passed Notification No. 48/2010/F.No.149/84/2010-SO(TPL) dated July 9, 2010. These long term infrastructure bonds offer an additional window of tax deduction of investments up to Rs. 20,000 for the financial year 2010-11. This deduction is over and above the Rs 1 lakh deduction available under sections 80C, 80CCC and 80CCD read with section 80CCE of the Income Tax Act. Infrastructure bonds help in intermediating the retail investor's savings into infrastructure sector directly. Long term infrastructure Bonds by IDFC IDFC issued an earlier tranche of these long term infrastructure bonds on November 12, 2010. This is the second public issue of long-te...
Read more
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now