Financial Risk Management Essay Example | Topics and Well Written Essays - 1250 words

Financial Risk Management - bear witness ExampleAn analysis of the article Risk Management Lessons from the Credit Crisis can effectively assist in evaluating financial risk management particularly in light of the credit crisis. In presenting its cause, the article is shared out into a number of parts each of which has its own speciality. Section 1 looks at the various structures of the mod risk measurement systems. Of particular interest is the position- found risk measurement system that tackles the various drawbacks brought by the traditionalistic returns-based system. The traditional system is shown to be rigid in that it cannot adjust to the various new parameters that characterize a dynamic society. In essence, they prove to be largely unreliable, thereby necessitating the adoption of the position-based measures. The article highlights how the position based risk measures are more versatile and can accommodate various aspects in relation to the muscularity of the contempor ary society. Part 2 of the article focuses on the various risks that establishments are exposed to. The classification is dual-lane into broad categories of known knowns, the unknown unknowns, and even the known unknowns. All of these categories are reached at depending on the preexistent uncertainties, with the most uncertain risk being classified under the unknown unknowns. Known knowns are evenhandedly manageable, and are the most basic of uncertainties that an institution is bound to encounter. The traditional system is shown to be rigid in that it cannot adjust.