Risk profiling is a process for finding the optimal level of investment risk for your client considering the risk required, risk capacity and risk tolerance, where,
Required Risk is the risk associated with the return required to achieve the organization’s goals from the financial resources available.
Risk Capacity is the level of financial risk the organization or individual can afford to take.
Risk Tolerance is the level of risk the organization or individual is comfortable with.
BASNCO risk providing service personnel’s identifies and classifies each of these characteristics to be separately assessed so that they can be compared to one another. Risk capacity and risk tolerance both act separately as constraints on what client might otherwise do to achieve their goals (risk required). It is unusual for a client to be able to achieve their goals from the resources available within both their risk capacity and risk tolerance. Where a mismatch between risk required, risk capacity and risk tolerance has been found, the BASNCO risk management depart guide the client through the trade-off decisions that are required to reach an optimal solution. Finally, we ensure that the client has realistic risk and return expectations so that the investment decision can be given and the properly informed consent can be achieved to implement the investment strategy.
BASNCO’s risk profiling service identifies:
1. The acceptable level of risk an individual or corporation is willing and prepared to accept. A corporation's risk profile attempts to determine how the corporation's willingness to take risk or aversion to risk will shape its overall decision-making strategy.
2. The risk profile may include the probability of resulting negative effects, and an outline of the potential costs and level of disruption for each risk. It will identify risks and threats faced by an organization.
BASNCO Risk Management service professionals closely supervise and analyze as, the greater the risk associated with any investment, the greater the return required. Either risk profile - whether used to describe the willingness to accept risk or an evaluation of the risks to which an entity is exposed - can be expressed in graphical form. BASNCO often measure risk in terms of risk probability - the likelihood that a risk will occur and risk impact - a measure of the consequences (such as project costs and schedule) if the risk occurs.