Risk Management is a field as old as the investment markets themselves, dominated by those who follow some basic rules. Rules that have been at the core of successful financial investing in markets throughout the world; that have survived the new products, the new technology, and the new mathematics.

Here are the basic rules when we are talking about Risk Management:

1  THERE IS NO RETURN WITHOUT RISK
Rewards go to those who take risks.

2  BE TRANSPARENT
Risk should be fully understood.

3  SEEK EXPERIENCE
Risk is measured and managed by people,
not mathematical models.

4  KNOW WHAT YOU DON'T KNOW
Question the assumptions you make.

5  COMMUNICATE
Risk should be discussed openly.

6  DIVERSIFY
Multiple risks will produce more consistent rewards.

7  SHOW DISCIPLINE
A consistent and rigorous approach will beat a constantly changing strategy.

8  USE COMMON SENSE
It is better to be approximately right, than to be precisely wrong.

9  RETURN IS ONLY HALF THE EQUATION
Decisions should be made only by considering the risk and return of the possibilities.