Financial Risk Management (FRM File 010)- Risk Management Overview

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Financial Risk Management (FRM File 010) Risk Management Overview








FRM textbook enhancement : Risk management overview


Risk in itself is not bad; risk is essential to progress, and failure is often a key part of learning. But we must learn to balance the possible negative consequences of risk against the potential benefits of its associated opportunity. (Van Scoy, 1992)


A risk is a potential future harm that may arise from some present action (Wikipedia, 2004), such as, a schedule slip or a cost overrun. The loss is often considered in terms of direct financial loss, but also can be a loss in terms of credibility, future business, and loss of property or life. This chapter is about doing proactive planning for your software projects via risk management.


Risk management is a series of steps whose objectives are to identify, address, and eliminate software risk items before they become either threats to successful software operation or a major source of expensive rework.


The Risk Management Practice The risk management process can be broken down into two interrelated phases, risk assessment and risk control, as outlined in Figure 1. These phases are further broken down. Risk assessment involves risk identification, risk analysis, and risk prioritization.


Risk control involves risk planning, risk mitigation, and risk monitoring.(Boehm, 1989) Each of these will be discussed in this section. It is essential that risk management be done iteratively, throughout the project, as a part of the team’s project management routine.


Risk Identification In the risk identification step, the team systematically enumerates as many project risks as possible to make them explicit before they become problems. There are several ways to look at the kinds of software project risks, as shown in Table 1. It is helpful to understand the different types of risk so that a team can explore the possibilities of each of them. Each of these types of risk is described below.


http://isites.nhu.edu.tw/yschao/doc/4481


Figure 1: The Risk Management Cycle.  


Written by Dr. Chao Yuang Shiang
Faculty, Dep. of Finance, Nan Hua university


趙永祥 博士
(南華大學財務金融學系暨財務管理研究所 專任助理教授)
08-September-2017

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趙永祥  博士 (Dr. Chao Yuang Shiang)




       




The author has published four international-finance related books which are shown as follows from 2012 to 2017.