There are various aspects of risk management, and it takes a book on risk to cover all aspects. Right now I am looking at some aspects of risk management that we ASSUME, and assume wrongly!

1. To be able to manage risk, we should be able to predict EXACTLY what will happen in the future: far from it. No expert on risk is ever able to predict the future. You should be reasonably accurate, that is all. In 1985 when I bought Hero Honda, I knew that the 2 wheeler industry had to do well. After all in a country with so many cycles, the motor cycle had to be a hit. Getting the demographics right, the industry call right, the trend right is some skill. Getting the company right for a long journey is a lot of matter of luck.
2. Risk is always visible to experts: WRONG. Experts struggle with risk in a portfolio. Even they do not understand that risk is not some vague number in a risk tolerance sheet. It is REAL, it is the feeling in the stomach, and not really easy for a professional to gauge your risk. At best he can give you a range.
3. Risk is Constant: WRONG. Risk keeps changing from time to time and can vary. The birth of a child, marriage, divorce, death of a parent or spouse, job loss, starting a business, taking a loan, spouse quitting the job – and many other factors can all have an impact on the risk profile. Sometimes the market plays a role in the risk taking ability. A bull market makes you bullish about taking risk, and a bear market scares you. Sadly, risk is actually counter intuitive.
4. Need to Take Risk is Constant: WRONG. If at an older age, say 75, a person has about Rs. 3 crores in liquid net worth, and has a pension of Rs. 35,000 p.m. And his total monthly expenses are about Rs. 25,000 (own house)..the NEED TO TAKE RISK is completely gone. He can afford to put Rs. 3 crores in 8% Tax Free Bonds and go off to sleep. His expenses may NEVER exceed his indexed pension (hello, 7th pay commission is around). Such a person can shift to a zero equity portfolio without any risk!
5. A sophisticated risk calculator is better. Nonsense. The less said the better.