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Natural Risk
Natural risks or nature risks are risks recognized in risk management that are related to the loss of natural assets. They may impact businesses or economies by impacting directly on operations or by negatively affecting society in a way that then creates market risks. The loss of nature can also contribute to systemic geopolitical risk because nature's assets and services, such as clean air, plentiful fresh water, fertile soils, a stable climate, provide vital public goods on which human societies rely for their functioning. An example is tropical deforestation. It is a key source of nature risk for sectors that either have an impact or dependency on tropical forests. Examples of impacts *Nature risks can increase policy and regulatory intervention. As a result, in response to these risks, some sectors of the economy might have to face big shifts in asset values or higher costs of doing business for companies that generate negative impacts on nature. For example, in 2018 Indone ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Deforestation Central Europe - Rodungen Mitteleuropa
Deforestation or forest clearance is the removal of a forest or stand of trees from land that is then converted to non-forest use. Deforestation can involve conversion of forest land to farms, ranches, or urban use. The most concentrated deforestation occurs in tropical rainforests. About 31% of Earth's land surface is covered by forests at present. This is one-third less than the forest cover before the expansion of agriculture, a half of that loss occurring in the last century. Between 15 million to 18 million hectares of forest, an area the size of Bangladesh, are destroyed every year. On average 2,400 trees are cut down each minute. The Food and Agriculture Organization of the United Nations defines deforestation as the conversion of forest to other land uses (regardless of whether it is human-induced). "Deforestation" and "forest area net change" are not the same: the latter is the sum of all forest losses (deforestation) and all forest gains (forest expansion) in a ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Risk Management Tools
Risk management tools allow the uncertainty to be addressed by identifying and generating metrics, parameterizing, prioritizing, and developing responses, and tracking risk. These activities may be difficult to track without tools and techniques, documentation and information systems. There are two distinct types of risk tools identified by their approach: market-level tools using the capital asset pricing model (CAP-M) and component-level tools with probabilistic risk assessment (PRA). Market-level tools use market forces to make risk decisions between securities. Component-level tools use the functions of probability and impact of individual risks to make decisions between resource allocations. ISO/IEC 31010 (Risk assessment techniques) has a detailed but non-exhaustive list of tools and techniques available for assessing risk. Market-level (CAP-M) CAP-M uses market or economic statistics and assumptions to determine the appropriate required rate of return of an asset, given ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Nature
Nature, in the broadest sense, is the physical world or universe. "Nature" can refer to the phenomena of the physical world, and also to life in general. The study of nature is a large, if not the only, part of science. Although humans are part of nature, human activity is often understood as a separate category from other natural phenomena. The word ''nature'' is borrowed from the Old French ''nature'' and is derived from the Latin word ''natura'', or "essential qualities, innate disposition", and in ancient times, literally meant " birth". In ancient philosophy, ''natura'' is mostly used as the Latin translation of the Greek word '' physis'' (φύσις), which originally related to the intrinsic characteristics of plants, animals, and other features of the world to develop of their own accord. The concept of nature as a whole, the physical universe, is one of several expansions of the original notion; it began with certain core applications of the word φύσις by ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Reputational Risk
Reputational damage is the loss to financial capital, social capital and/or market share resulting from damage to a firm's reputation. This is often measured in lost revenue, increased operating, capital or regulatory costs, or destruction of shareholder value. Ethics violations, safety issues, security issues, a lack of sustainability, poor quality, and lack of or unethical innovation can all cause reputational damage if they become known. Reputational damage can result from an adverse or potentially criminal event, regardless of whether the company is directly responsible for said event, (as was the case of the Chicago Tylenol murders in 1982). Extreme cases may lead to large financial losses or bankruptcy, as per the case of Arthur Andersen. Reputation is recorded as an intangible asset in a company's financial records. Hence, damage to a firm's reputation has financial repercussions. Minor issues can be amplified by external social processes which lead to even more ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Moral Hazard
In economics, a moral hazard is a situation where an economic actor has an incentive to increase its exposure to risk because it does not bear the full costs of that risk. For example, when a corporation is insured, it may take on higher risk knowing that its insurance will pay the associated costs. A moral hazard may occur where the actions of the risk-taking party change to the detriment of the cost-bearing party after a financial transaction has taken place. Moral hazard can occur under a type of information asymmetry where the risk-taking party to a transaction knows more about its intentions than the party paying the consequences of the risk and has a tendency or incentive to take on too much risk from the perspective of the party with less information. One example is a principal–agent problem, where one party, called an agent, acts on behalf of another party, called the principal. If the agent has more information about his or her actions or intentions than the princi ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Valuation Risk
Valuation risk is the risk that an entity suffers a loss when trading an asset or a liability due to a difference between the accounting value and the price effectively obtained in the trade. In other words, valuation risk is the uncertainty about the difference between the value reported in the balance sheet for an asset or a liability and the price that the entity could obtain if it effectively sold the asset or transferred the liability (the so-called “exit price”). This risk is especially significant for financial instruments with complex features and limited liquidity, that are valued using internally developed pricing models. Valuation errors can result for instance from missing consideration of risk factors, inaccurate modeling of risk factors, or inaccurate modeling of the sensitivity of instrument prices to risk factors. Errors are more likely when models use inputs that are unobservable or for which little information is available, and when financial instru ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Political Risk
Political risk is a type of risk faced by investors, corporations, and governments that political decisions, events, or conditions will significantly affect the profitability of a business actor or the expected value of a given economic action. Political risk can be understood and managed with reasoned foresight and investment. The term political risk has had many different meanings over time. Broadly speaking, however, political risk refers to the complications businesses and governments may face as a result of what are commonly referred to as political decisions—or "any political change that alters the expected outcome and value of a given economic action by changing the probability of achieving business objectives". Political risk faced by firms can be defined as "the risk of a strategic, financial, or personnel loss for a firm because of such nonmarket factors as macroeconomic and social policies (fiscal, monetary, trade, investment, industrial, income, labour, and developme ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Model Risk
In finance, model risk is the risk of loss resulting from using insufficiently accurate models to make decisions, originally and frequently in the context of valuing financial securities. However, model risk is more and more prevalent in activities other than financial securities valuation, such as assigning consumer credit scores, real-time probability prediction of fraudulent credit card transactions, and computing the probability of air flight passenger being a terrorist. Rebonato in 2002 defines model risk as "the risk of occurrence of a significant difference between the mark-to-model value of a complex and/or illiquid instrument, and the price at which the same instrument is revealed to have traded in the market". Types Burke regards failure to use a model (instead over-relying on expert judgment) as a type of model risk.http://www.siiglobal.org/SII/WEB5/sii_files/Membership/PIFs/Risk/Model%20Risk%2024%2011%2009%20Final.pdf Derman describes various types of model risk that ar ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Country Risk
Country risk refers to the risk of investing or lending in a country, arising from possible changes in the business environment that may adversely affect operating profits or the value of assets in the country. For example, financial factors such as currency controls, devaluation or regulatory changes, or stability factors such as mass riots, civil war and other potential events contribute to companies' operational risks. This term is also sometimes referred to as political risk; however, country risk is a more general term that generally refers only to risks affecting all companies operating within or involved with a particular country. Political risk analysis providers and credit rating agencies use different methodologies to assess and rate countries' comparative risk exposure. Credit rating agencies tend to use quantitative econometric models and focus on financial analysis, whereas political risk providers tend to use qualitative methods, focusing on political analysis. ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Financial Risk Modeling
Financial risk modeling is the use of formal mathematical finance, mathematical and econometric techniques to measure, monitor and control the market risk, credit risk, and operational risk on a firm's balance sheet, on a bank's trading book, or re a fund manager's portfolio value; see Financial risk management. Risk modeling is one of many subtasks within the broader area of financial modeling. Application Risk modeling uses a variety of techniques including market risk, value at risk (VaR), Historical simulation (finance), historical simulation (HS), or extreme value theory (EVT) in order to analyze a portfolio and make forecasts of the likely losses that would be incurred for a variety of risks. As above, such risks are typically grouped into credit risk, market risk, model risk, liquidity risk, and operational risk categories. Many large financial intermediary firms use risk modeling to help portfolio managers assess the amount of Capital requirement, capital reserves to maint ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
Key Risk Indicator
A key risk indicator (KRI) is a measure used in management to indicate how risky an activity is. Key risk indicators are metrics used by organizations to provide an early signal of increasing risk exposures in various areas of the enterprise. It differs from a key performance indicator (KPI) in that the latter is meant as a measure of how well something is being done while the former is an indicator of the possibility of future adverse impact. KRI give an early warning to identify potential events that may harm continuity of the activity/project. KRIs are a mainstay of operational risk analysis. Definitions According to OECD :''A risk indicator is an indicator that estimates the potential for some form of resource degradation using mathematical formulas or models.'' Risk management Security risk management According to Risk IT framework by ISACA, key risk indicators are metrics capable of showing that the organization is subject or has a high probability of being subject ... [...More Info...] [...Related Items...] OR: [Wikipedia] [Google] [Baidu] |
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