What Is The Meaning,function,and Importance Of Risk Management?

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Jackie Russell Profile
Jackie Russell answered
Risk management is a term that refers to the identification, assessment, and prioritisation of risks with risks being defined as an uncertainty of objectives. The identification of risk is followed by the coordinated and economical application of resources to minimise, monitor and control the potential impact of unfortunate events or to maximize the realisation of opportunities.

The methods used and goals of risk management vary significantly according to whether the risk management method is in the context of project management, security, industrial processes, financial portfolios, actuarial assessments, engineering  or public health and safety.

There are a number of risk management standards which have been developed. These include the National Institute of Science and Technology, the Project Management Institute, actuarial societies, and ISO standards.

Various strategies to manage risk include transferring of the risk to another party, avoiding the risk altogether, reducing the negative impact of the risk and accepting some or all of the consequences of a particular risk.

Certain aspects of many risk management standards have been criticised for having no measurable improvement on risk even though the confidence in estimates and decisions increase. If risks are not properly or appropriately assessed and prioritised, it could mean that time may be wasted in dealing with risk of losses that are not likely to occur. Spending too much time assessing and managing unlikely risks can divert resources that could be used more profitably elsewhere.
Christopher Sheppard Profile
Risk management plays an important role in ensuring that organizations are properly prepared to identify and mitigate the operational risks that they are exposed to. These risks limit or diminish the organizations ability to achieve its intended objectives, and thus acceptable levels of resources should be dedicated to identifying and limit, if not completely avoid, the negative effects of operational risks.

For more information on Business Risk Management and on the function a dedicated Risk Manager can play in an organization please visit the linked sites.

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