Portfolio Management Q155

0. Analyst 1: Risk management is the process by which an organization or individual defines the level of risk to be taken, measures the level of risk being taken, and adjusts the latter toward the former, with the goal of maximizing the company’s or portfolio’s value or the individual’s overall satisfaction, or utility.
Analyst 2: Risk management is the process where a risk manager not only understands the effect of environmental circumstances on the business, but also knows that he cannot do anything about it. Which analyst’s statement is most likely correct?

Answer
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Option : A
Explanation : Analyst A is correct because risk management covers understanding the level of bearable risk, measure the risk taken, adjust the bearable risk with the level of risk taken, while keeping in view the value maximization and utility of the company portfolio.

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