Prudential Risk Management

Definition ∞ Prudential risk management involves the systematic identification, assessment, and mitigation of risks that could jeopardize the financial stability and soundness of an institution or system. This practice focuses on protecting assets, ensuring liquidity, and maintaining solvency to safeguard against unforeseen economic shocks. It emphasizes caution and foresight in financial operations.
Context ∞ Prudential risk management is a critical concept in the regulatory discussions surrounding digital assets and financial institutions engaging with crypto. News often covers how regulators are urging banks and other financial entities to apply robust frameworks to address the unique risks associated with cryptocurrencies, such as volatility, cyber threats, and operational complexities. Sound prudential practices are essential for mainstream crypto integration.