what is a risk profile 
a risk profile is an evaluation of an individual s willingness and ability to take risks it can also refer to the threats to which an organization is exposed a risk profile is important for determining a proper investment asset allocation for a portfolio organizations use a risk profile as a way to mitigate potential risks and threats risk profiles for individualsthe risk profile for an individual determines that person s willingness and ability to take on risk risk in this sense refers to portfolio risk the ability to take risks is evaluated through a review of an individual s assets and liabilities an individual with many assets and few liabilities has a high ability to take on risk whereas an individual with few assets and many liabilities has a low ability to take on risk an individual with a well funded retirement account sufficient emergency savings and insurance coverage and additional savings and investments with no mortgage or personal loans likely has a high ability to take on risk an individual who lacks some of these assets an emergency fund for example and has too many liabilities would be less able to take on risk willingness and ability to take on risk may not always match up of course for example someone with many assets and few liabilities may be capable of taking on risk but may also be quite conservative by nature and simply not want to take on risk this will affect how the portfolio is constructed risk can be thought of as the trade off between earning a higher return or having a lower chance of losing money in a portfolio 12risk profiles for companiesa risk profile can also illustrate the risks and threats faced by an organization 3 it may include the probability of negative effects and the potential costs and level of disruption for each risk 45it is in a company s best interest to be proactive when it comes to its risk management systems 6 some risks can be minimized if they are properly accounted for companies often create a compliance division which helps ensure that the organization and its employees are following regulatory and ethical processes many companies hire independent auditors to help discover any risks so that they can be properly addressed before they become external issues failing to minimize risk can lead to negative consequences for example if a pharmaceutical company doesn t properly test its new treatment via the proper channels it may harm the public and lead to legal and monetary damages failing to minimize risk could also leave the company exposed to a falling stock price lower revenues a negative public image and potential bankruptcy 