Question

'Risk management is not about elimination of risk', Discuss in detail

Answer 1

Yes it is true that the Risk management cannot completely eliminate risk because the words "risk management" signify that to manage the risk and risk is very common factor which that an investor keep in his or her mind while doing investment and go for the investment which will return higher return and bear lower risks but however risk is still in the position and does not eliminate, this is the examaple an the individual but for companies it is headache because the company invest huge capital which is collected through the borrowings and Equity from the shareholders, so in this case the shareholders want higher dividends but the company is investing that collected amount to the channels of the business to earn income but there are lot of risks in putting huge funds to the business because there is always an uncertainity or risk of the loss or low incomes and the Risk management team is therefore hired to manage the risk as per the market situations and atmosphere of the business conditions because sometimes in markets there is recession and in recession the company cannot earn more income, to study the market in every aspect that the Risk could be evaluated and invest only when there is lower risk and higher chances of the huge return.