In a business context, what does "risk management" entail?

In a business context, risk management refers to the comprehensive process of identifying, assessing, and mitigating potential risks that could negatively impact an organization. This involves recognizing various types of risks, including operational, financial, compliance, strategic, and reputational risks. By systematically evaluating the likelihood and potential impact of these risks, businesses can develop strategies to manage or mitigate them. This can range from implementing preventive measures, such as training and policies, to risk transfer options like insurance.

The intent of risk management is to minimize the probability of unexpected events that could harm the organization's operations or objectives, thereby ensuring stability and continuity. Effective risk management contributes to informed decision-making, enhances a company's reputation, and ultimately supports achieving strategic goals by safeguarding assets and resources.