Risk Management – The Basics

Abstract

The article clarifies the most essential methods for risk management.

This includes especially the methods for identification, quantification and simulation based risk aggregation (e.g. monte carlo simulation). It is pointed up that an appropriate quantification of all relevant risks and a risk aggregation by the monte carlo simulation are both crucial for an efficient risk management.

Also an impression of the basics for the organization of risk management systems is given and the main aspects of risk coping and risk control are explained.

Overall, a modern, „decision-oriented“ risk management is portrayed which is able to predict changes due to decisions in the risk-return profile of the company already during the process of preparing those decisions (e.g. in terms of investment or acquisitions).

Keywords: risk management, decision-making, decision