An Introduction to Risk Management
Risk management generally defined as the process of identifying threat to the business and evaluating the possible solution by considering the economical application of resources to control the unfortunate events. Organizations usually predict or anticipate every probable risk that can happen and prepare a pre-formulated plan to control and or deal the possible consequences. The formulated plan normally consists of strategies on how to avoid the risk, ways to reduce the impact and how to face and recover when the particular problem happened.
Assessment is important in planning the risk management but the primary complexity on this is determining and/ or evaluating the rate of incident and the harshness of impact for it is not easy to provide statistical information. Research is very important in all facets of every business that is why it is necessary to study and know every process and rules in conceptualizing risk management.
Risk management can categorized in different types, some of them are:
- Financial risk management
- Operational risk management
- Technology risk management
- Credit risk management
- Commodity risk management
- Market risk management
- Quantitative risk management
- Bank risk management
- Currency risk management
- Integrated risk management
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Organizations have settled standard principles of risk management those are the following:
1. It should create value
2. Risk management should be an essential component of an organization
3. Risk management should be systematic
4. It should be a part of decision-making in an organization
5. It should explicitly address uncertainty
6. Risk management should be base on the most-excellent available information
7. Risk management should modify
8. It should be transparent and inclusive
9. It should take into account human factors
10. Risk management should be dynamic and responsive to change.
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