What Is Risk Management?

What is Risk Management?

  • Risk & Insurance Management Society: 
    A sound management discipline whose goals it is to protect assets and resources. 

  • Public Risk Management Association: 
    Planning for the possible negative consequences arising out of an entity’s activities. 

  • IIA-Associate in Risk Management (Section 54): 
    The process of making and carrying out decisions that protect the organization’s assets. 

Basically, Risk Management Involves:

  • Trying to stop losses from happening 
    (through avoidance, risk control, loss control, or loss prevention) 

  • Paying for the losses that do occur 
    (through reduction, insurance or risk transfer) 

Steps in the Risk Management Process:

  1. Identify Risks and Analyze Them:
    • What services and assets could cause a loss for your/our entity? For example, a loss of money, public image or reputation, loss of income, damage to physical property, human resource loss, etc.
    • What kinds of losses occur, how often and how severe are they? 

  2. Review Options For Responding to Risks:
    • Examine the feasibility of alternative risk management techniques (exposure avoidance, loss prevention, loss reduction, segregation of exposure units, contractual or risk transfer, risk financing or retention. 

  3. Select the Best Technique(s):
    • Determine which risk management treatment or combination of treatments will best suit the risk and your entity.

  4. Implement and Monitor the Results:
    • After putting programs into place, monitor the results, measure effectiveness and make revisions as necessary.

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