9 Rules of Risk Management

This is a list of risk rules posted on the office wall of a senior investment bank risk manager, sent in from a reader. I really liked it a lot, it has broad applications for all of us. – JB


1.       There is no return without risk

Rewards go to those who take risk

2.       Be transparent

Risk should be fully understood

3.       Seek experience

Risk is measured and managed by people, not mathematical models

4.       Know what you don’t know

Question the assumptions you make

5.       Communicate

Risk should be discussed openly

6.       Diversify

Multiple risks will produce more consistent rewards

7.       Show discipline

A consistent and rigorous approach will beat a constantly changing strategy

8.       Use common sense

It is better to be approximately right than precisely wrong

9.       Return is only half the equation

The risk as well as the return needs to be considered when making decisions.

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