According to the Oxford Dictionary, risk management is defined as “The forecasting and evaluation of financial risks together with the identification of procedures to avoid or minimize their impact”. In other words, it is the practice of identifying potential risks in advance, analyzing them and taking precautionary steps to reduce those risks. One example of risk management, which most of us have, is car insurance. The idea of car insurance revolves around realizing the risks of financial loss involved in car accidents and taking steps in reducing those risks by collecting a specific amount of money from the car’s driver every month.
The same concept is applied to businesses. A successful business usually has a team of experts in risks managements who have expertise in identifying and solving potential risks that may harm the company. The risk management process is a framework for the actions that need to be taken. There are five basic steps that are taken to manage risk; these steps are referred to as the risk management process. It begins with identifying risks, goes on to analyze risks, then the risk is prioritized, a solution is implemented, and finally, the risk is monitored. In manual systems, each step involves a lot of documentation, administration, and, of course, hard work.
Although it may seem difficult, risk management is a trait that any person can obtain through practice. Without even knowing it, we perform those practices in our daily lives, like responsible adults. For example, realizing that you have the electricity bill to pay by the end of the month creates a risk of experiencing power outage if you did not pay those bills. Thus, you manage your finances throughout the month so that you will have enough money for that electricity bill. Overall, risk management is not only a practice but also a skill that a person obtains throughout experience and academics.
https://www.360factors.com/blog/five-steps-of-risk-management-process/
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