Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities.
Why do you need Risk Management?
Managing risks takes a broad-based, systematic approach to preventing accidental losses, reducing the cost of losses that occur, and finding the most efficient way to pay for whatever losses remain. In the context of risk management, insurance is only one of several possible techniques that can be used to handle “loss exposures.” A loss exposure is a possibility of loss.
How do you manage Risk?
Central to the disciple of managing risk is the process. A convenient way of summarizing the process is to list the steps shown below:
1. Identify and analyze loss exposures
2. Examine the feasibility of alternative RM techniques