The ebb and flow of market volatility, monetary policy shifts, geopolitical tensions and business cycle changes are among the many potential risks to your portfolio. Investment risk management strategies like diversification, asset allocation and regular rebalancing help you protect your portfolio and position it to achieve your financial goals.
Whether you’re nearing retirement and need to draw on your investments soon, or you’ve got some time to spare for riskier assets with the potential for higher returns, your level of comfort with taking risk will determine what types of investments you make. Managing investment risk helps you balance your risk appetite with your long-term goals and provides a framework for evaluating the potential financial outcomes of different investment choices.
Mastering Risk Management in Investments
The Investors Centre is intrinsically linked to returns, so it’s critical to manage them. By evaluating the potential financial impact of investment options, you can better identify and prioritize growth opportunities that align with your personal or professional financial goals.
A strong risk management process requires a mix of structured internal processes, robust independent review, and continuous oversight. Inadequate risk practices can lead to transparency issues, such as the case of New York’s governor’s office underreporting COVID-19-related deaths in nursing homes during the pandemic. To avoid these problems, businesses need a comprehensive enterprise risk management strategy with common terminology, documented processes and centralized collection of key risk data. This approach can also help reduce the risk of conflict of interest by separating the function from the fund manager or CIO.