A systematic process for identifying and evaluating the risks involved in investment and financial decisions.
Risk assessment is a fundamental component of risk management that involves identifying potential risks that could negatively impact an investment or financial decision and evaluating their likelihood and potential impact. This process allows individuals and organizations to prioritize risks, allocate resources effectively, and develop strategies to mitigate or avoid them. Key elements include identifying risks, analyzing their implications, and continuously monitoring the risk environment. Understanding and performing effective risk assessment is crucial for achieving financial freedom as it helps in making informed decisions that minimize potential losses.
Risk management is not about avoiding risks but understanding and managing them.
