Doubtfully, there is a person who does not know that there is always a risk in finance. You do not need to be a financier or knowledgeable about the finance subject to make it out that when the people aim at making profit, there is always a risk because they can lose money! Unfortunately, nobody has thought a way of making profits without risking money and if anyone does it, he or she will certainly become the richest person ever. But until we wait for that to happen, we need to accept the fact that risk does exist, especially in the area of finance.
But as our society has progressed, we have realized that risk can actually be controlled. That is the job of the finance managers. They aim at determining the risk of each investment or deal which is extremely useful because it shows the chance of success and the chance of failure. As you can probably understand, that is an extremely complex task and that is why the finance managers get so much money for doing what they do!
It is not surprising that risk’s determination involves the math subject. The finance managers use hundreds of formulas, constants and methods of calculations in order to find out what the risk of a deal or investment will be. Although there are hundreds of software programs whose purpose is making things easier for the finance managers, the task still remains complicated and time-consuming. You do not think that it takes one hour for determining the risk, do you? It may take weeks, even months, due to the large amount of factors which are taken into consideration. For instance, those could be the companies’ financial status, the local market development, the global market development, positive effects of eventual successful financing, negative effects of eventual unsuccessful financing and many others. Some large companies include hundreds of factors when calculating the risk so that the results can be accurate and precise in the end.
And when the procedure of risk-determining ends, it is time for the analyzers to get involved. They are given the results and analyze them. Afterwards, all eventual negative and positive effects of the deal (or investment) are mentioned. The only thing left is making the decision whether it is worth doing it or it would be better not to make the investment.
Basically, that was the entire procedure of the risk-calculating. As you could see, it is not a simple task at all and the finance managers and analyzers’ job deserves to be so well-paid!