Risk Management Flashcards, test questions and answers

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What is Risk Management?

Risk Management is a process used by organizations to identify, assess, and manage potential losses from an event or activity. Risk management involves identifying potential risks and developing strategies to reduce or eliminate them. It also involves assessing the likelihood of each risk occurring and its impact on the organization. Risk management is a critical component of any business strategy, as it helps ensure that the organization’s resources are used effectively and efficiently.The risk management process begins with identifying potential risks. This can include both internal and external sources such as employee misconduct, fire, theft, natural disasters, changes in market conditions, etc. After risks have been identified they must be assessed for their likelihood of occurrence. This assessment should consider both the probability of occurrence and its possible magnitude or cost if it were to occur. Once risks have been identified they must be managed through various means such as prevention strategies (such as improved safety protocols), avoidance (not engaging in certain activities) or mitigation strategies (reducing exposure). Once an organization has identified and assessed its potential risks it needs to develop a plan for managing them over time. This plan will involve setting goals for managing each risk type along with outlining specific steps that need to be taken in order to achieve these goals. This includes determining which processes will need improvement in order to better manage each risk type; creating procedures for monitoring the effectiveness of measures taken; assigning roles within the organization responsible for managing each risk; creating communication plans between departments responsible for different elements of risk management; creating reporting systems so that any incidents can quickly be reported up the chain; establishing audit standards; setting up compliance systems; conducting periodic reviews by third-party auditors; establishing insurance policies as needed; etc.