Risk management is the process of identifying, assessing, and controlling potential risks that could negatively impact an organization’s objectives. It involves proactive planning to minimize the likelihood and impact of adverse events.
Characteristics
– Systematic approach: Risk management follows a structured process to identify and evaluate risks.
– Continuous process: It is an ongoing activity that requires regular review and adjustment.
– Informed decision-making: It provides a framework for making decisions based on risk assessments.
– Stakeholder involvement: Engaging stakeholders is crucial for understanding risks and developing effective strategies.
Examples
– Financial risk management: Companies may use hedging strategies to protect against fluctuations in currency or commodity prices.
– Project risk management: A construction firm might conduct risk assessments to identify potential delays due to weather conditions.
– Cybersecurity risk management: Organizations implement security protocols and training to mitigate the risk of data breaches.
– Health and safety risk management: Businesses may conduct regular safety audits to identify hazards in the workplace and implement corrective measures.