What is risk management?

1,068 Views Updated: 20 Nov 2017
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Risk management is the process of identifying, assessing and controlling threats to an organization's capital and earnings. These threats or risks could be a result of variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters.
IT companies specifically use these risk management strategies to alleviate the risk of losing important data. Risk management has become one of the top priorities for digitized companies these days. Risk management plan includes companies' processes for identifying and controlling threats to its digital assets, including proprietary corporate data, a customer's personally identifiable information and intellectual property.
Risk management standards have been developed by several organizations, including the National Institute of Standards and Technology and the ISO. These standards are planned in order to help organizations in identifying specific threats, assess unique vulnerabilities which can determine their risk, identify ways to reduce these risks and finally implement risk reduction efforts according to the organizational strategy.
A risk management plan normally includes:
1.    Creating value for the organization.
2.    Should influence the company's overall decision-making process.
3.    Addressing the uncertainties
4.    Should be systematic and structured.
5.    Should be transparent and all-inclusive.
6.    Should be adaptable to change.

Risk management is a term related to the financial planning that takes place in various companies and business institutions. This term is generally used for referring to the financial risks that the company may face during a year. Any company that is going to start a new working year or  a particular start up that is beginning its function will need to assess those financial risks that they may have to face during the year and all those financial risks that may come up without any prior warning. What is important to understand is the fact that each company does a risk management as a part of its prior planning. A crucial part of the planning for the company is to make sure that they have assessed the financial risks that the company is not really facing in the now, but, may come up a part of the future functioning of the company.
This is essential to be done because it is going to be impossible to deal with financial risks if there is no prior measures that have been taken. What is important to understand is the idea that dealing with financial risks can be tricky because you cannot get a large sum of money in a short span of time. In case you will need to arrange money you will need to give adequate time for the paper works and the processes involved. Keeping this in mind the possible financial risks are calculated beforehand and there are the various ways of managing them and the possible measure for dealing with them are made possible by the company beforehand. This is done to make sure that in case the company will have to face a sudden financial challenge they are going to be able to do it without any delay. 

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