riskiarvestust

Riskiarvestust is a concept used in risk management and finance to describe the deliberate extraction of value from existing risk exposures that an organization or portfolio already bears. It lies alongside risk assessment and risk mitigation but emphasizes realizing risk-adjusted returns from current risk positions rather than primarily reducing risk.

Overview and purpose

The idea is to harvest value embedded in risk exposures by systematically identifying, measuring, and exploiting risk premia or contingency value, within the organization’s risk appetite and governance framework. It aims to convert inherent risk into potential upside through informed, controlled strategies rather than through passive acceptance or outright avoidance.

Approach and techniques

Riskiarvestust typically involves a phased process: identifying relevant risk drivers, assessing the risk-adjusted return potential, and designing strategies to realize that potential. Techniques may include dynamic allocation, hedging or partial hedges, option-like instruments, and disciplined use of diversification or leverage within predefined risk limits. Ongoing monitoring, performance measurement, and risk controls are essential to prevent excessive downside and ensure alignment with objectives and governance.

Applications

In financial markets, riskiarvestust may entail capitalizing on observed risk premia, carry trades, or volatility harvesting. In corporate risk management, it can mean purposeful risk-taking aligned with long-term value creation, such as exploiting volatility in currency, commodity, or supplier risk through structured approaches within approved governance.

Criticism and considerations

Supporters note potential value creation, while critics warn that aggressive harvesting can increase losses and erode risk culture if not properly governed. Success depends on robust measurement, clear risk appetite, and effective stress testing.