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VC).
 
It would cover a certain period of time frame thereby protecting the company from any market risks and enable the board to make a clean exit from the company.
 
Tools and Implementation
 
After researching on the techniques employed by leading firms through primary research, there is a specific approach which emerges from an examination of large-scale risk management systems. The management of the banking firm relies on a sequence of steps to implement a risk management system. These can be identified as:
 
1. Standards and reports
 
2. Position limits or rules
 
3. Investment guidelines or strategies
 
4. Incentive contracts and compensation.
 
In general, these tools are established to measure exposure, define procedures to manage these exposures, limit individual positions to acceptable levels, and encourage decision makers to manage risk in a manner that is consistent with the firm's goals and objectives. Further elaboration on these steps throws more light on the techniques.
 
Standards and Reports
 
The first of these risk management techniques involves two different conceptual activities, i.e.,
 
standard setting and financial reporting. Managing underwriting standards, risk categorizations, and standards of review are all traditional tools of risk management and control. Consistent evaluation and rating of exposures of various types are essential to understand the risks in the portfolio, and the extent to which these risks must be mitigated or absorbed.
 
The standardization of financial reporting is important, third party audits, regulatory reports, and rating agency evaluations are also essential for investors to gauge asset quality and firm level risk.
 
Position Limits and Rules
 
Another technique for internal control of active management is the use of position limits, and / or minimum standards for participation. In terms of the latter, the domain of risk taking is restricted to only those assets or counterparties that pass some prespecified quality standard. Then, even for those investments that are eligible, limits are imposed to cover exposures to counterparties, credits, and overall position concentrations relative to various types of risks. While such limits are costly to establish and administer, their imposition restricts the risk that can be assumed by any one individual, and therefore by the organization as a whole. In general, each person who can commit capital will have a well-defined limit. This applies to traders, lenders, and portfolio managers. Summary reports show limits as well as current exposure by business unit on a periodic basis. In large organizations with thousands of positions maintained, accurate and timely reporting is difficult, but even more essential.
 
Investment Guidelines and Strategies
 
Investment guidelines and recommended positions for the immediate future are the third technique commonly in use. Here, strategies are outlined in terms of concentrations and commitments to particular areas of the market, the extent of desired asset-liability mismatching or exposure, and the need to hedge against systematic risk of a part本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。