Risk Profile

AAA

DEFINITION of 'Risk Profile'

An evaluation of an individual or organization's willingness to take risks, as well as the threats to which an organization is exposed. A risk profile identifies:

1. The acceptable level of risk an individual or corporation is prepared to accept. A corporation's risk profile attempts to determine how the corporation's willingness to take risk (or aversion to risk) will affect its overall decision-making strategy.

2. The risks and threats faced by an organization. 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.

INVESTOPEDIA EXPLAINS 'Risk Profile'

In general, 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. Risk is often measured 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. Investors, for example, can evaluate the risk to which a portfolio is exposed and make buy and sell decisions based on this risk and their willingness to accept risk.

RELATED TERMS
  1. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. ...
  2. Market Risk

    The possibility for an investor to experience losses due to factors ...
  3. Risk

    The chance that an investment's actual return will be different ...
  4. Price Risk

    The risk of a decline in the value of a security or a portfolio. ...
  5. Risk-Return Tradeoff

    The principle that potential return rises with an increase in ...
  6. Net Premiums Written To Policyholder ...

    A ratio of an insurance company’s gross premiums written less ...
Related Articles
  1. Identifying And Managing Business Risks
    Entrepreneurship

    Identifying And Managing Business Risks

  2. Calculating (Small) Company Credit Risk
    Entrepreneurship

    Calculating (Small) Company Credit Risk

  3. Cautionary Signs For International Investors
    Economics

    Cautionary Signs For International Investors

  4. Mitigate Your Equity Risk
    Mutual Funds & ETFs

    Mitigate Your Equity Risk

Hot Definitions
  1. Conduit Issuer

    An organization, usually a government agency, that issues municipal securities to raise capital for revenue-generating projects ...
  2. Financing Entity

    The party in a financing arrangement that provides money, property, or another asset to an intermediate entity or financed ...
  3. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  4. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  5. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  6. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
Trading Center