Shortie to Risk Management

What is Risk Management?

Employing statistics, mathematics and what have you in numerics?

A figleaf? A role at which you can point fingers when things go wrong?

It’s much easier and has to be seen in the light of history – the history of finance.

Credit and risk share the same background in the medieval language of seafaring merchants. First noted in ancient Greece, credit became an important resource to support commercial shipping (lat. pecunia traiecitiae) based on lender’s belief (lat. credo) in the lending merchant’s promise to pay on his return. Such risky ventures started
when the vessel was cut off (lat. resecāre) from the coast to sail into the open sea while being imperilled to run into a cliff (lat. resecum).

To cut a sharper line between credit and risk: credit analysis determines a customer’s certain ability to pay (credo) whereas risk analysis deals with the uncertainty and severity of losses (resecum) potentially incurred a single or multiple times by a straight or revolving credit or project.

Credit and risk are two sides of the same coin.

It makes me wondering now whether risk receptiveness can be taken from war and economic history of nations, i.e.  whether seafaring nations are more riskabsorbing than land-based nations?

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