Risk is a major concern of almost all investors. When shareholders invest their money in a company, they expect management to take risks with those funds.
What ethical limits should managers observe when taking risks with other people's money?
1. Ethical risk management is essentially about following a code of conduct and not being corrupt while investing the money of shareholders or other investors.
2. Risk and return go hand in hand, thus higher the risk higher would the return be but at the same time while ensuring higher return, Managers should effectively manage the risk.
3. Managers should before investing in a particular fund or corporation, honestly assess the returns expected and the resources they have ( in terms of total funds )
4. Managers should not get involved in finding their personal benefits, they should not prefer their own returns at the cost of the shareholders and should not get indulge in any insider trading.
5. Managers should abide by the culture of integrity and make proper disclosures in theur reports and should not hide any important information from the investors.
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