Risk managementRisk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.
Risk assessmentRisk assessment determines possible mishaps, their likelihood and consequences, and the tolerances for such events. The results of this process may be expressed in a quantitative or qualitative fashion. Risk assessment is an inherent part of a broader risk management strategy to help reduce any potential risk-related consequences. More precisely, risk assessment identifies and analyses potential (future) events that may negatively impact individuals, assets, and/or the environment (i.e. hazard analysis).
Financial riskFinancial risk is any of various types of risk associated with financing, including financial transactions that include company loans in risk of default. Often it is understood to include only downside risk, meaning the potential for financial loss and uncertainty about its extent. A science has evolved around managing market and financial risk under the general title of modern portfolio theory initiated by Harry Markowitz in 1952 with his article, "Portfolio Selection".
RiskIn simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environment), often focusing on negative, undesirable consequences. Many different definitions have been proposed. The international standard definition of risk for common understanding in different applications is "effect of uncertainty on objectives".
Risk matrixA risk matrix is a matrix that is used during risk assessment to define the level of risk by considering the category of probability or likelihood against the category of consequence severity. This is a simple mechanism to increase visibility of risks and assist management decision making. Risk is the lack of certainty about the outcome of making a particular choice. Statistically, the level of downside risk can be calculated as the product of the probability that harm occurs (e.g.
Operational risk managementOperational risk management (ORM) is defined as a continual recurring process that includes risk assessment, risk decision making, and the implementation of risk controls, resulting in the acceptance, mitigation, or avoidance of risk. ORM is the oversight of operational risk, including the risk of loss resulting from inadequate or failed internal processes and systems; human factors; or external events. Unlike other type of risks (market risk, credit risk, etc.) operational risk had rarely been considered strategically significant by senior management.
Financial risk managementFinancial risk management is the practice of protecting economic value in a firm by managing exposure to financial risk - principally operational risk, credit risk and market risk, with more specific variants as listed aside. As for risk management more generally, financial risk management requires identifying the sources of risk, measuring these, and crafting plans to address them. See for an overview. Financial risk management as a "science" can be said to have been born with modern portfolio theory, particularly as initiated by Professor Harry Markowitz in 1952 with his article, "Portfolio Selection"; see .
IT riskInformation technology risk, IT risk, IT-related risk, or cyber risk is any risk relating to information technology. While information has long been appreciated as a valuable and important asset, the rise of the knowledge economy and the Digital Revolution has led to organizations becoming increasingly dependent on information, information processing and especially IT. Various events or incidents that compromise IT in some way can therefore cause adverse impacts on the organization's business processes or mission, ranging from inconsequential to catastrophic in scale.
Binary relationIn mathematics, a binary relation associates elements of one set, called the domain, with elements of another set, called the codomain. A binary relation over sets X and Y is a new set of ordered pairs (x, y) consisting of elements x in X and y in Y. It is a generalization of the more widely understood idea of a unary function. It encodes the common concept of relation: an element x is related to an element y, if and only if the pair (x, y) belongs to the set of ordered pairs that defines the binary relation.
Risk premiumA risk premium is a measure of excess return that is required by an individual to compensate being subjected to an increased level of risk. It is used widely in finance and economics, the general definition being the expected risky return less the risk-free return, as demonstrated by the formula below. Where is the risky expected rate of return and is the risk-free return. The inputs for each of these variables and the ultimate interpretation of the risk premium value differs depending on the application as explained in the following sections.
Value at riskValue at risk (VaR) is a measure of the risk of loss of investment/Capital. It estimates how much a set of investments might lose (with a given probability), given normal market conditions, in a set time period such as a day. VaR is typically used by firms and regulators in the financial industry to gauge the amount of assets needed to cover possible losses. For a given portfolio, time horizon, and probability p, the p VaR can be defined informally as the maximum possible loss during that time after excluding all worse outcomes whose combined probability is at most p.
Operational riskOperational risk is the risk of losses caused by flawed or failed processes, policies, systems or events that disrupt business operations. Employee errors, criminal activity such as fraud, and physical events are among the factors that can trigger operational risk. The process to manage operational risk is known as operational risk management.
GaitGait is the pattern of movement of the limbs of animals, including humans, during locomotion over a solid substrate. Most animals use a variety of gaits, selecting gait based on speed, terrain, the need to maneuver, and energetic efficiency. Different animal species may use different gaits due to differences in anatomy that prevent use of certain gaits, or simply due to evolved innate preferences as a result of habitat differences.
Finitary relationIn mathematics, a finitary relation over sets X1, ..., Xn is a subset of the Cartesian product X1 × ⋯ × Xn; that is, it is a set of n-tuples (x1, ..., xn) consisting of elements xi in Xi. Typically, the relation describes a possible connection between the elements of an n-tuple. For example, the relation "x is divisible by y and z" consists of the set of 3-tuples such that when substituted to x, y and z, respectively, make the sentence true. The non-negative integer n giving the number of "places" in the relation is called the arity, adicity or degree of the relation.
Converse relationIn mathematics, the converse relation, or transpose, of a binary relation is the relation that occurs when the order of the elements is switched in the relation. For example, the converse of the relation 'child of' is the relation 'parent of'. In formal terms, if and are sets and is a relation from to then is the relation defined so that if and only if In set-builder notation, The notation is analogous with that for an inverse function. Although many functions do not have an inverse, every relation does have a unique converse.
Liquidity riskLiquidity risk is a financial risk that for a certain period of time a given financial asset, security or commodity cannot be traded quickly enough in the market without impacting the market price. Market liquidity – An asset cannot be sold due to lack of liquidity in the market – essentially a sub-set of market risk.
Ternary relationIn mathematics, a ternary relation or triadic relation is a finitary relation in which the number of places in the relation is three. Ternary relations may also be referred to as 3-adic, 3-ary, 3-dimensional, or 3-place. Just as a binary relation is formally defined as a set of pairs, i.e. a subset of the Cartesian product A × B of some sets A and B, so a ternary relation is a set of triples, forming a subset of the Cartesian product A × B × C of three sets A, B and C.
Risk aversionIn economics and finance, risk aversion is the tendency of people to prefer outcomes with low uncertainty to those outcomes with high uncertainty, even if the average outcome of the latter is equal to or higher in monetary value than the more certain outcome. Risk aversion explains the inclination to agree to a situation with a more predictable, but possibly lower payoff, rather than another situation with a highly unpredictable, but possibly higher payoff.
Reflexive relationIn mathematics, a binary relation R on a set X is reflexive if it relates every element of X to itself. An example of a reflexive relation is the relation "is equal to" on the set of real numbers, since every real number is equal to itself. A reflexive relation is said to have the reflexive property or is said to possess reflexivity. Along with symmetry and transitivity, reflexivity is one of three properties defining equivalence relations.
Homogeneous relationIn mathematics, a homogeneous relation (also called endorelation) on a set X is a binary relation between X and itself, i.e. it is a subset of the Cartesian product X × X. This is commonly phrased as "a relation on X" or "a (binary) relation over X". An example of a homogeneous relation is the relation of kinship, where the relation is between people. Common types of endorelations include orders, graphs, and equivalences. Specialized studies of order theory and graph theory have developed understanding of endorelations.
