Risk Management Mistakes to
Risk Management Mistakes to
Avoid
Avoid
Risk Limits
•It is important that every company define in a clear and unambiguous way limits to the financial risks can be taken.
•Procedures should then be set up to ensure limits are adhered to.
Risk Limits
•
It is important that companies monitor
risk carefully when derivatives are used.
•
Without close monitoring, it is impossible
to know if a derivative trader has
Difficult Situation
•It could be a tricky situation when an individual exceeds risk limits and makes a profit.
•It is tempting to ignore violations of risk limits when profit results; which in turn leads to a
culture where risks are not taken seriously.
Do Not Assume You Can
Outguess the Market
• Some traders may be better than others.
• But no one persists all the time.
• It shows that luck is obvious compared to skill.
• Thus, there is no reason to increase an individual’s risk limits as a result of
