Financial Risk Management For Dummies

Chapter 4

Managing Financial Risk

In This Chapter

Interacting with financial markets

Thinking of finance as a game

Staying balanced

Managing to survive the market

Risk managers don’t work in a vacuum, and they aren’t omnipotent dictators. As a risk manager, you need to set up a system for managing risk; you can’t make it up on the fly. You need to think about the data you’ll rely on, the calculations you’ll do, and the actions you’ll take. Doing so requires planning and accommodating a range of factors including budgeting, staffing, information technology (IT) resources and more.

At the same time, you don’t want to let the system degenerate into a bureaucratic box-checking exercise. Systems and planning are essential, but by themselves they’re worthless. The point isn’t to let the process dictate everything you do, but to take care of the routine details so you’re free to use your brain for creative thought.

Think of a system of sentries watching the perimeter of a military camp. If you do nothing else, the sentries don’t help. They won’t stop an attack of any significant force, and ...