A risk profile identifies the acceptable level of risk an individual is prepared and able to accept. A corporation's risk profile attempts to determine how a willingness to take risk (or aversion to risk) will affect an overall decision-making strategy.
Risk profiles can be created in a number of ways, but generally begin with a risk profile questionnaire. All risk profile questionnaires score an individual's answers to various probing questions to come up with a risk profile, which is later used by used by financial.advisors, both human and virtual, to help shape an individual's portfolio.asset allocation. This asset allocation will directly affect the risk in the portfolio, so it is important that it aligns well with the individual's risk profile.
An investor makes investments in order to achieve certain financial goals. A risk profile helps an investor understand how much risk they can take vs how much risk they should take to achieve their goals.
There are multiple risk profiling tools that are available online and you can use them to get your risk assessment done. Upon completion you will be put into one of the risk buckets depending on your responses to the given questions (e.g. low risk taker, medium risk taker, high risk taker). Once you know your risk profile you can determine what kind of investor you are, what kind of returns you should expect from your investment portfolio and what kind of investment portfolio you should have.
Level of financial risk that an investor can manage comfortably based on his life situation (e.g. risk capacity will be higher for a young salaried investor vs a middle aged man with two children).
Investor's Adviser goals to understand where they are headed and their current resources to identify risks they may be required to take up to achieve certain goals (e.g. invest in equities to plan for retirement).