Management risk refers to the risk that company or fund managers actions may hurt shareholders and the company or fund being managed. This is usually due to ineffective or dishonest management, seen in the cases of Enron or many mutual/hedge funds.

However,  even management with good intentions may make mistakes, this is something that investors should keep in mind. Just because you have an honest guy running a company doesn’t mean he’s capable, and just because he’s honest and capable doesn’t mean he won’t make mistakes.

Related Terms

• Asset Management Companies
• Active Management
• Active Management
• Systemic Risk
• Risk Measures
• Counterparty Risk

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