Risk Management in the Investment Process

Investment decisions are strategic decisions that require a thorough analysis of risk, because the risk management is a basis of decision making. The goal of investing is not just profit in a certain period of time, but depending on the preferences of the decision maker, there should be a compromise between maximizing the expected return on investment and efforts to reduce the risk to a minimum. Analysis and risk assessment is an integral part of any investment process, because during the life of the investment project, there is a risk that the project will not achieve desired result. There is no such situation in which is known all factors that influence the choice and implementation of investment decisions and investors are inevitably faced with certain risks. In order to reduce the risk to the lowest possible level, the risk must be adequately considered, assessed, monitored and avoided. In this way, management of the company are trying to quantify the potential risks of investing and by making rational decisions provide quality and cost-effective investment projects that are undoubtedly a conditio sine qua non for optimal allocation of capital.