Tip 1: Risk management as a management system
Tip 1: Risk management as a management system
More and more recently in the news and in the thematic articles one can meet the notion of risk management. And now many experts talk about risk management as a separate management system.
Instructions
1
Each organization, be it a small company withfive employees or a huge international corporation faces risks. Of course, the size of the company depends on the risks that it faces. To understand risk management as a management system, it is important to determine the objectives of the company.
2
The most common goal of the company is toReceiving a profit. However, it is worth noting that this goal hides deeper objectives, namely, the company's development, stable operation, expansion, etc. When you get enough profit, even a small company gradually invests the funds for further development. And in this regard, the prevention of risks and the ability to manage them becomes an important task for any company.
3
Risk management is aimed at organizing workto reduce the degree of risk in an uncertain economic situation. This is a whole system of risk management, as well as various types of relationships: economic, financial, legal, etc. Risk management includes both strategy and tactics of management.
4
If we consider risk management as a systemmanagement, it can distinguish two subsystems: the object and the subject of management. Under the object of management is understood as the risk itself, and risky investments of capital, and economic relations between business entities. Examples of such relationships include relations between business partners, competitors, customers and suppliers, etc. Under the subject of management is understood a special group of people, which carries out the functioning of the object.
5
Through risk management it is possible to determineThe future deviations from the calculated results, after that they can be controlled. However, for the proper management of risks, a clear distribution of responsibility is necessary both among top management and at all levels. Top management should simultaneously act as the initiator of the implementation of the risk management system and the control body. The decisions made must not contradict the legislation, international acts and internal documents of the company.
6
At the moment there are several standardson risk management in different countries of the world. These include: the Risk Management Standard of the Federation of European Risk Managers Associations, the Risk Management Standard for Australia and New Zealand, the UK Risk Management Code of Practice, ISO 31000: 2009, Risk Management. Principles and Guidelines "of the International Organization for Standardization (ISO).
Tip 2: How to identify trends
Profit in the Forex market is possibledifferent methods. Any of them, one way or another, depends on the actions of the largest players in this market - market makers. The amount of actions of market makers creates the current mood of the market - the market trend. Determination of the current trend is an obligatory part of the daily work of traders. We will consider this part of the work in more detail.
You will need
- Basic idea of what the Forex market in general and price charts in particular.
Instructions
1
The concept of "trend" in relation to the Forex marketindicates the prevailing direction of change in the exchange rate of one currency relative to another. The trend may be ascending (bullish), descending (bearish) or lateral, otherwise known as "flat". In bullish and bearish trends, I necessarily have lots where the price moves for a short time in the direction opposite to the main one. Such areas are called "correction".
2
Flot is completely composed of such short sections of multidirectional movement, from which it is impossible to single out an unambiguous trend up or down.
3
To determine the current trend, usedifferent techniques, but in any of them the required input parameter will be a period of time. It is customary to distinguish three main time intervals of price changes: a long-term trend (from several months to several years), a medium-term (from a week to several months) and a short-term trend (within one, maybe two days). Why is this period so important ("timeframe" in the traders' jargon) is not difficult to understand: for example, short-term segments of the price movement versus the current trend of the annual chart on the weekly chart will not be short-term price adjustments, but full-bodied trends with their own "kickbacks". Correction of the same weekly charts in turn will be differently classified on the hourly price charts. The choice of the time interval depends on the type of trade used, and the type of trade is determined by the available opportunities - what tools are available, what amount is involved in the trade and what percentage of it is acceptable to risk in one transaction. These aspects of trade are considered capital management systems ("mani-management") and risk management systems ("risk management"). Having defined the time interval for revealing the trend, we, in fact, will perform the most important part of the task of identifying the current direction of the price movement. After that, it is enough to visually evaluate the graphics of the selected timeframe to see the direction of the trend.
5
There are many options for making a profitusing a trend ("trading systems"). In order to formalize the rules of their systems, the authors formulate different options for identifying trends and trends using technical indicators. Often such formal rules only confuse what is obvious. And, nevertheless, most traders (especially novice traders) prefer to trade according to clearly defined rules. In this case, the trader should first determine the trading system, and it must contain rules for determining the trend, which the author of the system considers most suitable for the instruments involved.
Tip 3: How to determine the level of market risk
Risk management is one of the most important components of an effective assessment of projected income. Based on market analysis risk management decisions are made and implemented, and possible losses are minimized.
Instructions
1
Market risk accompanies open positions ontransactions related to the receipt of speculative income, for example, the purchase and sale of currency, securities, options and futures trading, etc. The danger is that such income is highly dependent on unstable factors such as interest rates, rates, price fluctuations and etc.
2
It is customary to distinguish four basic forms of marketrisk: stock, interest, currency and commodity. This, respectively, assessing the fall in the value of securities, changes in interest rates, currency fluctuations and changes in the price of goods. Sometimes the stock and commodity risk are combined into one - price risk.
3
In order to determine level market risk, i. to estimate its possible influence on the expected income, it is necessary to calculate the aggregate amount of risks, which is equal to: РР = 12.5 · (ПР + ФР + ВР), where ПР - interest rate risk, ФР - stock and ВР - currency.
4
The method of determining market risk iscalculation of the quantitative indicator of market risk. The result is expressed in monetary units and represents the estimated amount of losses that will not be exceeded within a given time period (time horizon) and with a given accuracy (confidence level).
5
The procedure for determining the level of market riskis carried out regularly, and the data is entered into the accounting system. On the basis of the information received, the manager evaluates the risk and makes decisions according to which the amount of risk can be minimized. In other words, the manager should maximize profits and minimize losses, otherwise the company may incur large losses.
6
Market risk management consists of severalstages: identification, assessment, continuous monitoring, monitoring and minimization. The information for making a decision must be complete so that it is objective.
