In general terms, Risk could be defined as a situation which involves exposure to some danger. Therefore, the probability of the occurrence of a certain negative action which could be caused due to controllable or uncontrollable reasons could be known as risk. Copy the link given below and paste it in new browser window to get more information on Independent Risk:- http://www.transtutors.com/homework-help/finance/independent-risk.aspx

1. Independent Risk

2. What is Risk?
“A situation which involves exposure to some danger”
A certain negative action which could be caused due to controllable or
uncontrollable reasons could be known as risk
Basic risk Capital risk Country risk
Default risk Delivery risk Economic risk
Exchange rate risk Interest rate risk Liquidity risk
Political risk Refinancing risk Reinvestment risk
Settlement risk Sovereign risk Underwriting risk
Types of Risks in finance

3. Common Risk versus Independent
Risk

4. Measuring of Systemic risk and Un-
systemic risk
R = Stock and the Market Correlation
σs = Standard Deviation of the Stock
σm = Standard Deviation of the Market portfolio
Ke = Expected return from the investment
Rf = Risk free return
ERP = Equity Risk Premium
FSRP = Firm-specific Risk Premium

5. Independent Risk Management
• A separate Risk Management or Risk Control division in organizations to
manage firm-specific risks
Main objective of the independent risk management
function
• Identify
• Assess and measure
• Control and mitigate
• Stress-test
• Monitor and report the risks

6. Independent Risk Management
Solutions
“Balancing the investment risk across a large portfolio/ Spreading
across multiple channels and methods”
Diversification of Stock Portfolio
With proper diversification, the investor can benefit from few investments
with price rise while suffering from decline in prices of few others and play
safe
Hedging
This would be particularly useful when
dealing with several foreign exchange
currencies to avoid experiencing losses
from several currencies

7. Factors of consideration for Independent
Risk Management
• Responsibility of risk
• Opportunity pursuits and decision making
• Defining the Chief Risk Officer’s position in the organization
• Communication with the top management
• Positioning of the Chief Risk Officer
• Strategic focus

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