What is Risk Management and its importance in big corporations.
                     What is Risk Management and its 
importance in big corporations?
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.
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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. 
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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
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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.
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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