A Practical Guide to Risk Management (A Summary)

Research Foundation of CFA Institute Monograph, 2012

9 Pages Posted: 15 Jun 2013

See all articles by Thomas Coleman

Thomas Coleman

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies; Close Mountain Advisors LLC

Date Written: September 14, 2012

Abstract

Risk management is the art of using lessons from the past to mitigate misfortune and exploit future opportunities — in other words, the art of avoiding the stupid mistakes of yesterday while recognizing that nature can always create new ways for things to go wrong. True risk management is about much more than numbers; it is the art of using numbers and quantitative tools to actually manage risk. Risk is a central, maybe the central, component of managing a financial organization. But risk management has something of a split personality. Managing risk is as much the art of managing people, processes, and institutions as it is the science of measuring and quantifying risk. A Practical Guide to Risk Management addresses that split personality — one side soft management skills, the other side hard mathematics — with an emphasis on how to think about risk. There are two preliminary issues before turning to risk management itself. The first is to recognize the importance of a consistent risk framework throughout the organization. The second is to think carefully about risk, randomness, and uncertainty.

Keywords: risk management, Research Foundation of CFA Institute, Coleman

JEL Classification: G10

Suggested Citation

Coleman, Thomas, A Practical Guide to Risk Management (A Summary) (September 14, 2012). Research Foundation of CFA Institute Monograph, 2012 . Available at SSRN: https://ssrn.com/abstract=2279377

Thomas Coleman (Contact Author)

University of Chicago - Irving B. Harris Graduate School of Public Policy Studies ( email )

1155 East 60th Street
Chicago, IL 60637
United States

Close Mountain Advisors LLC ( email )

19 Davenport Ave.
Unit B
Greenwich, CT 06830
United States

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