---
id:"kb-2026-00472"
title:"Risk Management"
schema_type:"TechArticle"
category:"business"
language:"en"
confidence:"high"
last_verified:"2026-05-22"
generation_method:"ai_assisted"
ai_models:["claude-opus"]
derived_from_human_seed:true
primary_sources:
  - title:"Against the Gods: The Remarkable Story of Risk (Peter Bernstein)"
    type:"book"
    year:1996
    url:"https://www.wiley.com/en-us/Against+the+Gods%3A+The+Remarkable+Story+of+Risk-p-9780471295631"
    institution:"Wiley"
secondary_sources:
  - title: "MDN Web Docs — HTTP"
    type: "documentation"
    year: 2026
    url: "https://developer.mozilla.org/en-US/docs/Web/HTTP"
    institution: "Mozilla"
completeness: 0.88
ai_citations:
  last_citation_check:"2026-05-22"
---

## TL;DR

Risk management identifies, assesses, and mitigates threats to an organization's capital and earnings. Process: identify risk → analyze (probability × impact) → evaluate → treat (avoid, reduce, transfer/insure, accept). Financial risk: market, credit, liquidity, operational. Enterprise Risk Management (ERM) takes a holistic approach.

## Core Explanation

Value at Risk (VaR): maximum expected loss at given confidence level (e.g., '95% VaR of $1M' means 5% chance loss exceeds $1M). Risk matrix: probability (rows) × impact (columns). Black Swan (Taleb): rare, unpredictable, high-impact events — you can't predict but you can build robustness. Diversification: 'don't put all eggs in one basket' — reduces unsystematic risk. Hedging: offsetting position to reduce risk.

## Further Reading

- [Against the Gods: The Remarkable Story of Risk (Peter Bernstein)](https://www.wiley.com/en-us/Against+the+Gods%3A+The+Remarkable+Story+of+Risk-p-9780471295631)