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What is Risk Management?
Home » Human Resources » Risk Management » What is Risk Management?Risk management is the recognition of, and response to, risk. Corporations are increasingly recognizing that in business, just about the only sure thing is that you will have risk. A 2004 study of global financial institutions by Deloitte reported that in the last two years alone, there has been a twenty-five percent increase in board-level oversight of risk management. Eighty-one percent of surveyed institutions have a specifically designated Chief Risk Officer.
Traditionally, risk management has primarily referred to a company's assessment of its susceptibility to risk, and while the field of risk management is expanding, a large part of it remains risk identification. Sometimes a company can easily identify risk, because it comes in the form of a decision. At other times, however, a company faces various risks and is not even aware of them.
Once you have identified an individual risk that your company faces, you must determine how you will respond to that risk. Is this a risk you simply want to avoid (and if so, how do you go about doing that?) or is this a risky opportunity that you want to embrace in the hopes of turning it to your advantage?
Your risk management strategy has major effects on your company's bottom line. Cutting your losses at the most opportune time can save your company millions. If you successfully take advantage of a risky opportunity, you may gain your company just as much. In addition to economic aspects, risk can have serious human consequences on your company. A risk-filled work environment affects your employees either positively or negatively--they can become overstressed or they may respond to a challenge with increased morale and effort.
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