Risk monitoring and control is the process of identifying, analyzing, and planning for newly discovered risks and managing identified risks.Throughout the process, the risk owners track identified risks, reveal new risks, implement risk response plans, and gage the risk response plans effectiveness. The key point is throughout this phase constant monitoring and due diligence is key to the success.The inputs to Risk Monitoring and Control are:Risk Management Plan- The Risk Management Plan is details how to approach and manage project risk. The plan describes the how and when for monitoring risks. Additionally the Risk Management Plan providesguidance around budgeting and timing for risk-related activities,thresholds, reporting formats, and tracking.Risk Register The Risk Register contains the comprehensive risk listingfor the project. Within this listing the key inputs into risk monitoring andcontrol are the bought into, agreed to, realistic, and formal risk responses,the symptoms and warning signs of risk, residual and secondary risks,time and cost contingency reserves, and a watchlist of low-priority risks.Approved Change Requests Approved change requests are thenecessary adjustments to work methods, contracts, project scope, andproject schedule. Changes can impact existing risk and give rise to newrisk. Approved change requests are need to be reviews from theperspective of whether they will affect risk ratings and responses ofexisting risks, and or if a new risks is a result.Work Performance Information Work performance information is thestatus of the scheduled activities being performed to accomplish theproject work. When comparing the scheduled activities to the baseline, itis easy to determine whether contingency plans need to be put into placeto bring the project back in line with the baseline budget and schedule. Byreviewing work performance information, one can identify if trigger eventshave occurred, if new risk are appearing on the radar, or if identified risksare dropping from the radar.

Performance Reports- Performance reports paint a picture of theproject's performance with respect to cost, scope, schedule, resources,quality, and risk. Comparing actual performance against baseline plansmay unveil risks which may cause problems in the future. Performancereports use bar charts, S-curves, tables, and histograms, to organize andsummarize information such as earned value analysis and project workprogress.All of these inputs help the project manager to monitoring risks and assure asuccessful project.Once the risk owner has gathered together all of the inputs, it is time toengage in risk monitoring and controlling. The best practices provided by PMIare:Risk Reassessment- Risk reassessment is normally addressed at thestatus meetings. Throughout the project, the risk picture fluctuates: Newrisks arise, identified risks change, and some risks may simply disappear.To assure team members remain aware of changes in the risk picture,risks are reassessed on a regularly scheduled basis. Reassessing risksenables risk owners and the project manager to evaluate whether riskprobability, impact, or urgency ratings are changing; new risks are cominginto play; old risks have disappeared; and if risk responses remainadequate. If a risk's probability, impact, or urgency ratings change, or ifnew risks are identified, the project manager may initiate iterations of riskidentification or analysis to determine the risk's effects on the projectplans.Status MeetingsStatus meetings provide a forum for team membersto share their experiences and inform other team members of theirprogress and plans. A discussion of risk should be an agenda item atevery status meeting. Open collaborative discussions allows risk ownersto bring to light risks which are triggering events, whether and how wellthe planned responses are working, and where help might be needed.Most people find it difficult to talk about risk. However, communicationwill become easier with practice. To assure this is the case, the projectmanager must encourage open discussion with no room for negativerepercussions for discussing negative events.Risk Audits- Risk audits examine and document the effectiveness ofplanned risk responses and their impacts on the schedule and budget.Risk audits may be scheduled activities, documented in the ProjectManagement Plan, or they can be triggered when thresholds areexceeded. Risk audits are often performed by risk auditors, who have specialized expertise in risk assessment and auditing techniques. Toensure objectivity, risk auditors are usually not members of the projectteam. Some companies even bring in outside firms to perform audits.Variance and Trend Analysis- Variance analysis examines thedifference between the planned and the actual budget or schedule inorder to identify unacceptable risks to the schedule, budget, quality, orscope of the project. Earned value analysis is a type of variance analysis.Trend analysis involves observing project performance over time todetermine if performance is getting better or worse using a mathematicalmodel to forecast future performance based on past results.Technical Performance Measurement- Technical performancemeasurement (TPM) identifies deficiencies in meeting systemrequirements, provide early warning of technical problems, and monitortechnical risks. The success of TPM depends upon identifying the correctkey performance parameters (KPPs) at the outset of the project. KPPs arefactors that measure something of importance to the project and aretime/cost critical. Each KPP is linked to the work breakdown structure(WBS), and a time/cost baseline may be established for it. The projectmanager monitors the performance of KPPs over time and identifiesvariances from the plan. Variances point to risks in the project's schedule,budget, or scope.Reserve Analysis- Reserve analysis makes a comparison of thecontingency reserves to the remaining amount of risk to ascertain if thereis enough reserve in the pool. Contingency reserves are buffers of time,funds, or resources set aside to handle risks that arise as a project movesforward. These risks can be anticipated, such as the risks on the RiskRegister. They can be unanticipated, such as events that "come out of leftfield." Contingency reserves are depleted over time, as risks trigger andreserves are spent to handle them. With constraints as above monitoringthe level of reserves to assure the level remains adequate to coverremaining project risk, is a necessary task.Outputs of the Risk Monitoring and Control process are produced continually,fed into a variety of other processes. In addition, outputs of the process areused to update project and organizational documents for the benefit offuture project managers. The outputs of Risk Monitoring and Control are:Updates to the Risk Register An updated Risk Register has theoutcomes from risk assessments, audits, and risk reviews. In addition it

Market risk is the risk of losses in positions arising from movements in market prices. Equity risk, the risk that stock or stock indices (e.g. Euro Stoxx 50, etc. ) prices and/or their implied volatility will change. Interest rate risk, the risk that interest rates (e.g. Libor, Euribor, etc.) and/or their implied volatility will change. Currency risk, the risk that foreign exchange rates (e.g. EUR/USD, EUR/GBP, etc.) and/or their implied volatility will change. Commodity risk, the risk that commodity prices (e.g. corn, copper, crude oil, etc.) and/or their implied volatility will change.Credit risk refers to the risk that a borrower will default on any type of debt by failing to make required payments.[1] The risk is primarily that of the lender and includes lost principal and interest, disruption to cash flows, and increased collection costs. The loss may be complete or partial and can arise in a number of circumstances.[2] For example: A consumer may fail to make a payment due on a mortgage loan, credit card, line of credit, or other loan A company is unable to repay asset-secured fixed or floating charge debt A business or consumer does not pay a trade invoice when due A business does not pay an employee's earned wages when due A business or government bond issuer does not make a payment on a coupon or principal payment when due An insolvent insurance company does not pay a policy obligation An insolvent bank won't return funds to a depositor A government grants bankruptcy protection to an insolvent consumer or businessTo reduce the lender's credit risk, the lender may perform a credit check on the prospective borrower, may require the borrower to take out appropriate insurance, such as mortgage insurance or seek security or guarantees of third parties. In general, the higher the risk, the higher will be the interest rate that the debtor will be asked to pay on the debt.

Types of credit riskCredit risk can be classified as follows:[3] Credit default risk The risk of loss arising from a debtor being unlikely to pay its loan obligations in full or the debtor is more than 90 days past due on any material credit obligation; default risk may impact all credit-sensitive transactions, including loans, securities and derivatives. Concentration risk The risk associated with any single exposure or group of exposures with the potential to produce large enough losses to threaten a bank's core operations. It may arise in the form of single name concentration or industry concentration. Country risk The risk of loss arising from a sovereign state freezing foreign currency payments (transfer/conversion risk) or when it defaults on its obligations (sovereign risk); this type of risk is prominently associated with the country's macroeconomic performance and its political stability.DEFINITION of 'Risk Management'The process of identification, analysis and either acceptance or mitigation of uncertainty in investment decision-making. Essentially, risk management occurs anytime an investor or fund manager analyzes and attempts to quantify the potential for losses in an investment and then takes the appropriate action (or inaction) given their investment objectives and risk tolerance. Inadequate risk management can result in severe consequences for companies as well as individuals. For example, the recession that began in 2008 was largely caused by the loose credit risk management of financial firms.INVESTOPEDIA EXPLAINS 'Risk Management'Simply put, risk management is a two-step process - determining what risks exist in an investment and then handling those risks in a way best-suited to your investment objectives. Risk management occurs everywhere in the financial world. It occurs when an investor buys low-risk government bonds over more risky corporate debt, when a fund manager hedges their currency exposure with currency derivatives and when a bank performs a credit check on an individual before issuing them a personal line of credit.

Financial risk managementFrom Wikipedia, the free encyclopediaCorporate finance

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Financial risk management is the practice of economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc. Similar to general risk management, financial risk management requires identifying its sources, measuring it, and plans to address them.Financial risk management can be qualitative and quantitative. As a specialization of risk management, financial risk management focuses on when and how to hedge using financial instruments to manage costly exposures to risk.In the banking sector worldwide, the Basel Accords are generally adopted by internationally active banks for tracking, reporting and exposing operational, credit and market risks.Contents 1 When to use financial risk management 2 See also 3 Bibliography 4 References 5 External linksWhen to use financial risk managementFinance theory (i.e., financial economics) prescribes that a firm should take on a project when it increases shareholder value. Finance theory also shows that firm managers cannot create value for shareholders, also called its investors, by taking on projects that shareholders could do for themselves at the same cost.When applied to financial risk management, this implies that firm managers should not hedge risks that investors can hedge for themselves at the same cost. This notion was captured by the hedging irrelevance proposition: In a perfect market, the firm cannot create value by hedging a risk when the price of bearing that risk within the firm is the same as the price of bearing it outside of the firm. In practice, financial markets are not likely to be perfect markets.This suggests that firm managers likely have many opportunities to create value for shareholders using financial risk management. The trick is to determine which risks are cheaper for the firm to manage than the shareholders. A general rule of thumb, however, is that market risks that result in unique risks for the firm are the best candidates for financial risk management.The concepts of financial risk management change dramatically in the international realm. Multinational Corporations are faced with many different obstacles in overcoming these challenges. There has been some research on the risks firms must consider when operating in many countries, such as the three kinds of foreign exchange exposure for various future time horizons: transactions exposure,[1] accounting exposure,[2] and economic exposure.[3]Financial risk management is the practice of economic value in a firm by using financial instruments to manage exposure to risk, particularly credit risk and market risk. Other types include Foreign exchange, Shape, Volatility, Sector, Liquidity, Inflation risks, etc.