Risk is an inherent part of any business and an exaggerated concern and focus on limiting risk may be inhibiting the business significantly. Risk management must be developed with the same precision and thought as with the development of the company's commercial strategy. Only then, the company can unleash its full potential.
Currency, fixed income and commodity markets are by nature volatile. Fundamental factors are changing rapidly as do geopolitical issues. Unpredictable prices on industrial input or output create hindrance as profitability is at risk. By assessing corporate exposure and designing a risk management structure that are in line with stakeholder interest, companies become more confident of their potential as risk becomes limited and more transparent. By having control, companies can push their borders further and increase return on investments compared to companies that are not able to understand the environment or how to act in it to reach its full potential.
For fund managers or proprietary traders, risk management is about maximizing return on risk taken but also about distributing risk capital or mandates to create the optimum portfolios, teams and performance.
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