Financial Risk Management – 5 ways to manage financial risk

financial risk

Financial Risk Management is the subject where you will find the way to manage to your all types to financial risk. Now it has been in major business sector specialists are doing optimisation on risk management. It doesn’t mean that financial risk management will come in the same. Risk management is certainly a good manner to save companies asset & keep distance from liabilities. But financial risk management is not a big part of risk management. Yes some how it’s related I can not push aside.

financial risk management
Finance theory provides that a middle level company should take a project when shareholder value will increase. And it has been also seen that share holders value creates by business manager, which is also known as investors  when you are applying your thoughts for optimising financial risk management means, business managers should not prevaricate risks those investors can protect them the same cost. This impression is captured by the coverage irrelevance suggestion: In market, the company can create value by covering a risk when the price of abiding that risk within the enterprise is the same as the price of carrying out the company.

Now the etiquette of financial risk management is getting changed world wide. Some where financial risk management is related to enterprise risk management (ERM) that is the extent of financial risk management, in a sense, the financing contingency. This concept is somewhere elusive that has different meanings to different people. Companies have experimented with the concept, which combines financial risk management, contingency plans and purchasing insurance in a single business unit. But some expertise professionals are there who can maintain both.

Financial risk management is applied in different ways if you see organizationally. In the board, there may be a risk committee. Usually there has some kind of risk committee composed of senior managers. In practice, several names are given to these two committees. Just like CRO (chief risk officer) and HRM (Head of the risk management). These designation looks into the risk management. They look into the financial risk management which includes credit risks, operational risks, and market risks.

The financial world requires professionals with strong analytical & mathematical skills basically this is the combination of finance with mathematics, economics, accountancy, and risk management. Prepare you for a career in investment management and risk management. You can choose one of two specialisations: Risk Management Professional and Chartered Financial Analysis.

Financial risk management is a subject from which we can get the knowledge to manage our all financial risk. Now the question is how to manage the financial risk.
1st of all we should know that what kind of financial risk there…

Here I have pointed out some major risks…

* Market Risk
* Credit Risk
* liquidity Risk
* Operational Risk
* reputation risk
* County Risk

Now how will you manage financial risk?

Here you will find five ways to manage financial risk:


1. Carry the right amount of insurance.
Yes, Insurance is right way to manage your finance. You will see that there is very less percentages that have got the right amount of insurance. Many people takes an enormous risk of not having auto insurance coverage, while many more are jumping out in medical insurance, health insurance or any major coverage. Unfortunately, sometimes to cover the premiums there is not enough in the budget. But if you can afford it, do be sure to keep policies should be up to date and adequate for their circumstances.

2. Diversify your income & your investment.
When I read about the problems of workers in the auto industry, I can understand about the importance of developing multiple way of income. My best advice is that invest your money as earliest possible to start working for you. You should about your money that its source of another income generator, other ways to create new revenue

Here is some evidence that demonstrates that diversification of the stock market works and is the best way to balance the overall portfolio risk.

3. Build an emergency fund.
When I started to save, my first priority was to build an emergency fund. Decided that part of my savings should be in a short-term savings (savings a/c preferable) and how much to implement in the long-term investments.

4. Keep your savings under FDIC limits.
Always try to keep your savings under FDCI limits, and remember that if your bank gets folded then you can lost your money as your banker will give you guarantee up to certain FDIC limits.

5. Limit debt and use credit wisely.
You should not carry a much amount of debt. But you can use credit card, if you have control on your spending. You should remember that credit is tool and we should not abuse it.

And if you follow these five ways to manage financial risk certainly you will be beneficial.

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