What is risk management?

Risk management is the process of identifying risks in a particular situation and thereby reducing its probability. In some cases, the acceptable risk is zero and sometimes higher. These risks can be natural causes, such as an accident or even a deliberate attack.

In the corporate world risk management is an organized activity that reduces business uncertainty. However, there are procedures to be followed by those responsible for risk management tasks in order to minimize the risk.

In the public sector, risk management is used to find where the risks to public and basic infrastructure are, and what measures should be taken to reduce or avoid it. However, in order to do this, the following steps must be taken both in the corporate and the public sphere.

First, you need to find out which are the most important things that require protection. Then you have to understand these threats, after which it is important to understand the probability of each threat that may become a reality. After determining the probability, the risk factor can be calculated. After risk has been calculated, people working with risk management can easily explain the ways in which risk can be mitigated and risk management measures can be prioritized on the basis of the developed strategy. These strategies may include transferring the risk to another person, avoiding the full risk, reducing the risk of the risk, or accepting the consequences of the risk.

Risk transfer every day when you buy automotive insurance. You know the risk of an accident exists, but it transfers the risk to the insurer and pays its losses. Risk assumption means you have to reduce your activity, for example, you can not afford to take the flight in the wrong time because of an accident. Risk reduction occurs every day at factories where sprinklers are installed to reduce fire damage. Finally, accepting a risk means understanding the risk, but accepting possible losses as the cost of avoiding it may be higher.

Traditional risk management programs focus on identifying physical or legal factors, such as natural disasters, fire, deaths, or litigation. Financial risk management programs focus on the risks that can be managed through financial instruments.

The most commonly used risk management approach is to address the biggest losses and most likely risks first. Then the risks with a lower probability and a lower loss are treated. However, it is difficult to determine these costs and probabilities, so the chances of bad farming in this area are generally high.

It is also very difficult to understand how much resources should be allocated to risk management. On one side you can save money and / or life when risk becomes a reality, and on the other hand it seems that the money spent on it can be spent on activities that can help you earn money for your company or government. Therefore, risk management has the potential to cost, and it is very important to understand how much it costs.

Source by sbobet

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