The examples of quantitative methods: Annual Loss Expected, Courtney's and Fisher's methods, ISRAM model, etc. Qualitative risk assessment does not operate on numerical data instead the results are in form of descriptions and recommendations for instance the Microsoft Corporate Security Group Risk Management (Artur Rot, 2008)
Project Risk Management Planning The term risk management planning is defined as a process of documentation done by the project manager to forecast on the risks, to value the effectiveness and the efficiency, to create a plan to mitigate them (Vocus PRW Holdings, LLC
Moreover, risk analysis of the overall project also poses the danger of developing inappropriate responses." (Dey, 2002, P 13)
In a construction industry, there are various risk management requirements and identification of these requirements is critical for the successful project implementation. (El-Gafy, 2008)
Identification of those risks is very critical to manage these risks, and risk assessment is a tool that a project manager could employ to identify and manage these risks based on the project treatment. (Klemetti, 2006)
Airline hedging strategies are simply unable to deal with volatility, because airlines do not wish to be overhedged in case the price drops. This scenario resulted in a $247 million charge for Southwest in 2008 (Bachman, 2008)
The company understands that accidents can happen but that any steps taken to avoid an accident is money well invested. It knows that doing business in a country like the United Kingdom "puts direct cost of accidents in the billions of dollars" (Thye, par
g. clothing difference among seasons and sex), personal preferences (some people feel comfortable in cold or hot), and actual mood (the state of mind, feeling happy or nervous) may have an influence (comfort is not just a physiological problem but psychological too)" (Martinez 2014:1)
Conclusion For many reasons, bank managers require adequate measures and assessment of risk. Risk management techniques such as performance analysis, value-at-risk models, stress testing, Monte Carlo simulation, and heuristic controls may provide banking institutions with better insight in identifying the sources of market risk, leading to a better understanding and analysis of how their own risk profiles may evolve over time in terms of profit and loss variations (Avraamides)
Performance Analysis Historical performance analysis provides insight of how a portfolio has performed over time. However, older data has limited value for forecasting risk because the structure of the portfolio and the market environment are constantly changing (Brooks, Beukes, Gardner, and Hibbert, 2002)
This is accomplished by generating thousands of possible scenarios that investments might take. More technically, Monte Carlo finds the best approximate answers or distributions of probable answers to problems with many variables and/or many possible outcomes (Davidson)
Despite its usefulness as a portfolio risk technique, performance analysis is often overlooked by risk managers. Value-at-Risk (VaR) Model Value at risk is an estimate of the largest loss that a portfolio is likely to suffer during all but truly exceptional periods (Hopper)
The major disadvantage of Monte Carlo simulation is its complexity, but it does a good job of explaining risk exposures because it provides specific examples of events that are of concern. Heuristic Controls Information about future potential losses and about the likelihood they will occur usually has to be put together for every individual case with a good deal of design work and risk managers avoid the use of heuristics (Schubert, 2003)
Portfolio Risk Management In today's competitive banking environment, an important challenge is to ensure adequate diversification of revenue sources across products, market segments and market and credit risks (Sturzinger)
Consumers are also being evaluated for health and finance to ensure that accounts are paid in a timely manner to prevent future losses of revenues. Current Trends in Risk Management Current trends in risk management are more with liquidity risks that involve funding, market, and counter party risks (Faucheux, 2009)
Counter party, or the ability of the consumers to pay bills and purchase goods and services, are also increasing challenges of organizations. The future of risk management is facing increased emphasis (Heineman)
Blackmailers attempt to extort payments from ones with the greatest potential harm from disclosures. People dating want to obtain information on a lover to evaluate health and longevity (Hoffman, 2007)
Each of these assets is subject to market price fluctuations. While theoretically at least these fluctuations reflect the intrinsic value of the good on the world market, mathematically they are random, reflecting the "divergent anticipations and conflicting interests" that render them unpredictable (Bouchard & Potters, 2003)
Some recommendation will be given with respect to the use of derivatives in risk management in order to optimize results. Derivatives and Risk Management In finance, a derivative instrument is one that has a price that is based on the price of a real underlying asset -- agricultural commodities, metals, sources of energy, currencies, stocks and bonds (Chance & Brooks, 2008)
For example, if an airline buys futures to hedge fuel prices, and the price goes up, the airline will win because the price it paid will be less than the market price at the time of purchase. However, if the price goes down, as in the second half of 2008, the airline will book a significant loss (Rivers, 2012)