What is Risk Management?
                     WHAT IS RISK 
MANAGEMENT?
WHAT IS RISK MANAGEMENT?
• Risk management encompasses the identification, analysis, and response to risk 
factors that form part of the life of a business. 
• Effective risk management means attempting to control, as much as possible, 
future outcomes by acting proactively rather than reactively. 
Source: corporatefinanceinstitute.com
POTENTIAL IMPACT
• Effective risk management offers the potential 
to reduce both the possibility of a risk occurring 
and its potential impact.
Source: corporatefinanceinstitute.com
RISKS MANAGEMENT 
STRUCTURES
• A good risk management structure should also 
calculate the uncertainties and predict their 
influence on a business. 
• Consequently, the result is a choice between 
accepting risks or rejecting them. 
Source: corporatefinanceinstitute.com
RESPONSE TO RISKS
• Avoidance: A business strives to eliminate a 
particular risk by getting rid of its cause.
• Mitigation: Decreasing the projected financial 
value associated with a risk by lowering the 
possibility of the occurrence of the risk.
• Acceptance: In some cases, a business may be 
forced to accept a risk. 
Source: corporatefinanceinstitute.com
IMPORTANCE OF RISK 
MANAGEMENT
• Risks management is an important process 
because it empowers a business with the 
necessary tools so that it can adequately 
identify and deal with potential risks. 
• Once a risk’s been identified, it is then easy to 
mitigate it.
Source: corporatefinanceinstitute.com
PROGRESSIVE RISK 
MANAGEMENT
• Progressive risk management ensures risks of a 
high priority are dealt with as aggressively as 
possible. 
• Moreover, the management will have the 
necessary information that they can use to 
make informed decisions
Source: corporatefinanceinstitute.com
RISK ANALYSIS PROCESS 1
• Identify existing risks: Risk identification mainly 
involves brainstorming. A business gathers its 
employees together so that they can review all 
the various sources of risk. 
Source: corporatefinanceinstitute.com
RISK ANALYSIS PROCESS 2
• Assess the risks: problem resolution involves identifying the problem and then finding 
an appropriate solution. 
• However, prior to figuring out how best to handle risks, a business should locate the 
cause of the risks.
Source: corporatefinanceinstitute.com
RISK ANALYSIS PROCESS 3
• Develop an appropriate response: Once a 
business entity is set on assessing likely 
remedies to mitigate identified risks and prevent 
their recurrence.
Source: corporatefinanceinstitute.com
RISK ANALYSIS PROCESS 4
• Develop preventive mechanisms for identified 
risks: Here, the ideas that were found to be 
useful in mitigating risks are developed into a 
number of tasks and then into contingency plans 
that can be deployed in the future.
Source: corporatefinanceinstitute.com