a science or an art
strategies for identifying and measuring risk can help treasury personnel develop a sound diversification policybefore a risk profile can be managed it must be identified. what is considered high risk by one entity may be considered the normal course of business by another entity. appetite for risk-taking will vary not only between industries but also between management styles.
once risk parameters have been identified a measurement system must be introduced.
a man who travels a lot was concerned about the possibility of a bomb on board his plane. he determined the probability of this, found it to be low, but not low enough for him so now, he always travels with a bomb in his suitcase. he reasons that the probability of two bombs being on board would be infinitesimal.
quote by john paulos.
the man has taken a strategic approach to risk management he has identified...
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