Definition and Purpose

Risk management is the process of identifying and mitigating risks to an organization's strategies, maximizing their effectiveness while making sure that risks taken are controlled and worthwhile. This allows organizations to make more informed decisions, better allocate funds, and more carefully navigate challenging situations.

Key Steps

1. Identification - Using research, historical analysis, and brainstorming techniques to reveal potential risks.
2. Assessment - Examining the potential consequences of identified risks using quantitative and qualitative analyses.
3. Response - Developing strategies to combat identified risks, minimizing negative impacts. This may also include accepting certain risks and altering management plans to work around risks.
4. Reporting - Transparent communication with stakeholders facilitates informed decision-making and leads to more effective solutions.
5. Governance - Establishing clear roles and responsibilities that guide organizational actions and culture. Integrating risk management strategies into everyday decision making processes.