What Are the Different Types of Financial Risk Management Software?

Financial risk management is the practice of managing investments, such as stocks, securities, and pensions, to reduce the chances of undesirable events occurring. Lessening the damage of undesirable events also is a function of effective risk management. Financial managers and analysts use financial risk management software to accurately calculate risk, potential gains and losses, and to cut back on cost. Some of the most common types of financial risk management software are programs that allow users to create investment portfolios where several investments can be observed at once and software that allows users to monitor the market in real time.

Most analysts who use financial risk management software develop portfolios. A portfolio is a collection of all the investments belonging to an individual or organization. Many experts believe that portfolios allow financial managers to assess risk more effectively since they can gauge the behaviors of all a client's assets. Financial professionals who manage a client's pension for example, might use financial risk management software to compare values of various investments to determine the security of a pension fund.

Many types of financial risk management software have the capability to monitor markets in real time. Some markets, such as currency markets, can experience drastic changes in a matter of minutes. Managers use software to watch for variations in rates and values. In some cases, risk management software might give a user access to a broker. This allows a manager to buy or sell securities as soon as he or she perceives a change.

Some kinds of software help users to remain compliant with regulations. Most markets are regulated by government or global organizations and agencies. These regulations can be complex and are prone to change. Investment professionals, such as a hedge fund managers whose investment strategies often are complicated, can use financial risk management software to plan strategies without having to worry about breaking laws.

For many investment professionals, it's important that risk management software generates clear reports. These reports can be distributed to clients, shareholders, and others who have financial interest in an organization. Many kinds of software include template documents that enable investment professionals to compose reports with ease.

Financial managers can purchase risk management software that they install directly onto their computers. Others pay a user fee for software on demand that a provider hosts from a website. Professionals who own their own software may be responsible for manually checking for periodic updates from the software publisher, though they are believed by many experts to have greater security. Individuals who use software on demand benefit from automatically updated programs, though they must keep up with scheduled payments.