What best describes the relationship between capital preservation and risk management?

The relationship between capital preservation and risk management is best captured by the idea that capital preservation is a subset of risk management. This understanding hinges on the premise that effective risk management encompasses various strategies and practices aimed at safeguarding investments.

Capital preservation specifically refers to strategies that prioritize maintaining the initial capital invested, often through conservative investment approaches. It aims to avoid losses and ensure that the original amount of money remains intact, making it a crucial aspect of the broader risk management framework. Therefore, when implementing risk management techniques, preserving capital becomes one of the main objectives.

In essence, risk management includes a variety of objectives, such as optimizing returns while minimizing potential losses. Capital preservation is a focused approach within this larger context, reinforcing the importance of maintaining a solid base of capital while navigating investment risks.