Any risk associated with finance is called financial risk. A definite decision in any sort of investment or credit runs the probable danger of suffering a loss i.e. a return which is lower than the actual expected return. This may be in the field of investment, business, credit, insurance, market and liquidity. The financial risk may take place at the domestic ground as well as at in international finance. There are certain management tools as well as assessment tools to help mitigate the dangers.
Financial Risk Management Tools
In order to mitigate the dangers as well as manage the various aspects of the financial exposure, one can use the following tools:
• Financial or Technical risk modeling
• Risk insurance and Self-insurance
• Transfer of risk through: Insurance in environment and Captive insurance
• Programs involved with Alternative Risk Finance
Some of the financial risk analysis tools include:
• RiskPAC
• CORAS
• OCTAVE
• Proteus
• RiskOptix
• RSAM
RiskPAC: It provides automated risk analysis. It eliminates the vulnerabilities in the design of strategy that is to be implemented. The tool carefully manages and mitigates the probable dangers. It includes both the long term as well as the short term uncertainties.
CORAS: This new improved user interface mitigates the risk which can be insured. One can transfer the risk. Depending on the probability of the uncertainty of a particular venture, the company figures out the list or the field where the individual particularly runs the danger of suffering losses in finance.
OCTAVE: OCTAVEAT is a tool, which includes the techniques as well as the methods for risk-based information on the security and the strategic assessment of a cost. By payment of a definite premium, you can mitigate the danger. You can attain risk insurance in various aspects.
RiskOptix: You can audit plan and regulate pressure with this tool. You can also make policies based on the uncertainties that you would face.
Key Concepts
Risk = Probability of Event X Cost of Event
The tools used in finance analysis are based on the particular formula mentioned above. You can avail more information about different tools online and use the information for the benefit of your company. Each of the tools is ideal for proper assessment. The assessment report helps provide you with a definite program on which you can base your finances for the particular abatement. Both internal and external factors contribute to risks in an investment plan.