The "Risk-Wise" Risk Management Planning Process E-Book

Michael Carpenter

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Global Finance Executive Select
• Sprache: Englisch

Seitenzahl: 45

Veröffentlichungsjahr: 2010

Beschreibung

From The "Risk-Wise" Investor, this chapter takes you through a step-by-step process to effectively manage risk. This risk planning strategy is dedicated to helping you become familiar and completely comfortable with an easy-to-use, very effective, and holistic risk management planning process. It's a system that you can put to work right away in preparing for and effectively managing the risks you'll face. Author and industry veteran Michael Carpenter believes the key to risk management is to recognize that business and financial phenomenon exists and to factor it into your investment thinking. This chapter demystifies risk management, covering: * Portfolio strategies for all market conditions * Active and Passive risk management strategies * Risk Assessment * Decision Making Checklists

Leseprobe

Contents

Cover

Title Page

Copyright

Chapter 11: The “Risk-Wise” Risk Management Planning Process

Step 1: Personal Risk Assessment

Step 2: Risk Management Strategies Review and Selection

Step 3: Evaluate Your Risk Reward Trade-offs

Step 4: Make Your Decision to Act or Not Act—Then Implement

Step 5: Ongoing Risk Monitoring and Decision Making

Reviewing the “Risk-Wise” Investor Risk Management Process Steps

Copyright © 2009 by Michael Carpenter. All rights reserved.

Disclaimer. This content is excerpted from The “Risk-Wise” Investor: How to Better Understand and Manage Risk, by Michael T. Carpenter (978-0-470-47883-7, 2009), with permission from the publisher John Wiley & Sons. You may not make any other use, or authorize others to make any other use of this excerpt, in any print or non-print format, including electronic or multimedia.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

From The “Risk-Wise” Investor, this chapter takes you through a step-by-step process to effectively manage risk. This risk planning strategy is dedicated to helping you become familiar and completely comfortable with an easy-to-use, very effective, and holistic risk management planning process. It’s a system that you can put to work right away in preparing for and effectively managing the risks you’ll face. Author and industry veteran Michael Carpenter believes the key to risk management is to recognize that business and financial phenomenon exists and to factor it into your investment thinking.

This chapter demystifies risk management, covering:

• Portfolio strategies for all market conditions

• Active and Passive risk management strategies

• Risk Assessment

• Decision Making Checklists

Derived from Carpenter, Michael. The “Risk-Wise” Investor: How to Better Understand and Manage Risk. Hoboken: Wiley, 2009. 978-0-470-47883-7; 272 pp.

978-1-118-00652-8 978-1-118-00653-5

CHAPTER 11

The “Risk-Wise” Risk Management Planning Process

Expect the best, plan for the worst, and prepare to be surprised.

Dennis Waitley

Now that we’ve reviewed a full lineup of diverse, risk related topics, it’s time to explore how to apply all those insights and information into a practical, user-friendly, nontechnical method to manage risk. Of course, having all that knowledge about the fundamental nature of risk, how it works, its history, various approaches to managing it—all the way to how our bodies can both help and harm us in our risk management efforts—is totally useless, unless we can put it to work for our personal benefit. Most investors tend to complicate their efforts in this regard by addressing risks individually, sequentially or as they pop up over time, rather than via a comprehensive, well thought out, and proactive risk management plan. To that end, this chapter is dedicated to helping you become familiar and completely comfortable with an easy-to-use, very effective, and holistic risk management planning process. It’s a system that you can put to work right away in preparing for and effectively managing the risks you’ll face. One of its big additional advantages is the program’s adaptability in dealing with risks well beyond those in the investment world. When you think about it, that really shouldn’t be surprising, given that the method is patterned on the highly adaptable risk management process we use in our daily lives. Ultimately, the multifunctionality and flexibility of this approach allows anyone who uses it to also manage the full range of risks she faces every day. Let’s begin with a brief review of the steps in “Risk-Wise” Investor risk management process.

Outlined below are the basic steps of the “Risk-Wise” Investor risk management planning process:

1. Personal risk assessment

Define riskIdentify risksUnderstand risksDetermine which risks to avoid, accept, and/or manage

2. Review risk reduction/management strategies available

3. Evaluate your risk/reward trade-offs

4. Make your decision to act or not act—then implement

5. Ongoing, effective risk monitoring and decision making

In this chapter, we will conduct an in-depth examination of the details of each step in the “Risk-Wise” Investor risk management process.

Step 1: Personal Risk Assessment

The personal risk assessment is focused on five key steps that must be addressed before proceeding with the rest of the risk management planning process Those risk assessment steps include defining, identifying, understanding, prioritizing, and then finally deciding which risks to avoid entirely, which risks to accept and manage, and which risks to accept outright, with no risk management effort.

Define Risk

You are certainly free to use any definition of risk you desire. However, one thing we know is that our definition or risk has enormous influence on how easy and effective or difficult and ineffective our risk management efforts will be. The right definition will empower us and make our job easier, the wrong definition will weaken us and make the job much tougher and much less effective.

The definition I personally use, and recommend that you use and embrace as well is this: The degree to which an outcome differs from your expectations.