There is hardly any other question that we’ve come across more often than this one – sometimes asked upfront and sometimes seen lingering at the top of the mind, but it’s almost always there – If the Risk Division cuts my positions for managing enterprise risks, how am I supposed to make profits? In other words – Risk Management or Trading Profits – the classic paradox is the perennial problem faced by several business heads. And almost always, the position in question is either expected to run further profits or expected to turn around to a profit making position soon!
The answer to such paradoxical situations is mostly contained in asking ourselves “How important is Risk Management for me and my organization?” It needs prioritization. Risk Management to you, is either more important than trading profits from one or more positions, or its less important. Which one is it?
You should also ask if your organization has the required understanding to change the Risk department from a silo function that says “No” to an integrated function that asks “How”. And therein lies the discovery of solving this classic paradox.
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