There are three key elements to successfully managing risk:

In a nutshell, financial intermediaries are the financial institutions that pool resources and channel funds from savers/lenders to spenders/borrowers. Smooth functioning of these institutions is very important for an efficient financial market and for the conduct of fiscal and monetary policies.

There are five generic risks to these financial institutions: systematic, credit, counterparty, operational, and legal. Systematic risk is the risk of asset value change associated with systemic factors.

1. Performing regularly-scheduled, comprehensive risk assessments.
2. Taking a risk-based approach and focusing time and resources on high-risk areas.
3. Developing and implementing programs to manage and mitigate risk.

Interest rate risk is the potential for investment losses that result from a change in interest rates. If interest rates rise, for instance, the value of a bond or other fixed-income investment will decline. The change in a bond’s price given a change in interest rates is known as its duration.

Risk management implies significant limits on the ability of highly leveraged financial institutions such as banks to provide badly needed venture capital; it implies that financial systems need more than banks. They also provide greater stability to financial systems and alternative funding sources for borrowers.

By taking chances, an organization grows. Risk management is important in an organization because without it, a firm cannot define its objectives for the future. The ability to manage risk will help companies act more confidently on future business decisions.

BLOGFive Steps to Reduce Risk

1. Step One: Identify all of the potential risks. (Including the risk of non-action).
2. Step Two: Probability and Impact. What is the likelihood that the risk will occur?
3. Step Three: Mitigation strategies.
4. Step Four: Monitoring.
5. Step Five: Disaster planning.

Five Ways to Minimize Risk Exposure

1. Stop looking for a silver bullet.
2. Don’t forget risk acceptance.
3. Use risk to enable business development.
4. Consider risk transference.
5. Improve existing controls before deploying new ones.

Some examples of risk prevention were reviewing emergency procedures, monitoring safety devices, empowering workers, and involving specialists and safety officers (who would be responsible for coordinating risk prevention within and across departments).