Investment vs Operational Risk

Risk Management

Investment risk refers to the uncertainty or potential loss associated with an investment. It refers to the possibility that the actual return on an investment will be lower than the expected return. Examples of investment risks include market risk, credit risk, and inflation risk.

Operational risk refers to the risk of loss due to inadequate or failed internal processes, systems, human error, and external events. This can include things like theft, fraud, natural disasters, and cyber attacks.

To manage both investment and operational risk, it's important to have a comprehensive risk management plan in place. This plan should consider both the type of risk and the likelihood of it occurring. For investment risk, this could involve diversifying your portfolio, regularly monitoring your investments, and having a plan in place for how to handle market downturns. For operational risk, this could involve having strong internal controls, backing up data regularly, and having insurance to cover losses from events outside of your control.

Disclaimer: This content is for informational and entertainment purposes only and does not constitute financial or investment advice. The information provided may be outdated or contain inaccuracies. Always conduct your own due diligence and consult a licensed financial advisor before making investment decisions. Investing involves risk, including the potential loss of principal.

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