Risk Management - Essay Example

This data is often the first input to decision makers to gage whether risks should be avoided and the most suitable and cost-efficient risk management procedure. Risk analysis involves the identification, evaluation as well as management of various risks (John n.d.). The type of risk in an organization depends on the industry to which the organization operates (John n.d.). Financial risk assessment and management is of economic worth. This is especially to firms using financial tools in managing exposure to risks.

Other financial risk may include inflation and volatility risk (Andersen 2012). Just like general risk management, the financial risk management necessitates identification of its sources, its measurements, as well as plans to avoid them in future. Financial risk analysis, assessment and management can both be quantitative and qualitative. Financial risk management emphasizes on the time and the means to evade the financial risks by using the specific financial instruments used in managing costly exposures to risk.

In the finance sector, the Basel Accords is an instrument that has been adopted generally by internationally banks for tracking, recording and revealing the operational risks, credit risks and market risks (Andersen 2012, p. 7). Financial risk management usually assist in clearing profits through cost evasion, cost inhibition and time savings. An inclusive financial risk management platform can avert wastefulness and replication that decreases needless costs, increases productivity, and enables reliability and communication.

An integrated system often permits several departments to accumulate information and cooperate amongst themselves. This can help in communication and understanding, thus reducing and containing risk while cutting costs and adding process consistency (Andersen 2012, p. 15). The first step in financial risk analysis is the inherent risk assessment, which involves assessing the financial statement