Sanjukta answered on Dec 21 2021
Risk management is the procedure that identifies, assesses, and controls threats to the earning and capital of a company. These risks arise from different sources such as legal liabilities, financial uncertainties, technology problems, natural disasters, strategic management issues, and accidents. The process of risk management also deals with minimizing risks as much as possible so that a company can achieve its business objectives properly.
The main objective of risk management is minimizing and preventing damage and loss of resources. Risk management gives ample amount of focus to minimize any kind of risk of significant adverse situations either unforeseen or foreseen (Hopkin, 2018).
The major role of the risk management process is:
· It consists of loss prevention, avoiding risk, financial risk, and reducing loss
· Controlling the securities of the firm that will be providing stability based on the financial system. The role of internal risk management is to control and protect a company from credit, market, operational, legal risk, and liquidity.
· Controlling an industry from systematic risk and protecting a business from everything
Various types of loss take place in a company such as human resource loss, financial loss, etc because of some major risks in business such as physical risks, human risks, location risks, and technology risks. Following is the main role of risk management in such losses:
Financial loss- This is the type of loss that takes place when a firm has a disparity between the money that is going out and the money and it leaves them in a net deficit. Risk management in this scenario will be identifying the cause behind it and then helping the business to restructure itself.
Physical risk- It is the type of risk that is quite common and this is building risk. Furthermore, this is related to loss of life from building risk and fire explosion. Risk management in this case attempts to prevent loss by making sure all of the workers know the location of the exit and installing a sprinkler system for providing extra protection to the documents, equipment, etc. Furthermore, there is a significant amount of risk from hazardous materials as well that results in loss of life in a firm such as from gas, acid, and poisonous liquid. A risk assessment manager creates a plan for handling the immediate effects of these risks.
Human risks- Injury and illness are one of the main workforce problems and this results in human resource loss. Applying a proper risk management strategy will be able to tackle this problem such as assigning and training backup employees for handling work of critical workers when they are not present due to health-related problems.
Risk management focuses on various strategies for achieving the loss prevention objective. For instance, real-time combination with the historical data, connecting analytical platforms for minimizing loss prevention data, and creating a centralized team for reviewing. Losses can take place because of the following reasons like operational risk, financial risk, and strategic risk. It is the duty of a risk assessment manager for determining the risks to the loss of a business. The implementation stage is quite vital in the entire risk management process as in this phase a risk manager needs to identify the goals of the firm and the most suitable methods for managing risk management (Glendon et al., 2016).
In terms of implications, loss prevention in any type of action is considered for reducing the amount of
eakage or wastage in the business.
However, the principle "as far as reasonably practicable" indicates that the degree of risk in a specific situation can be directly balanced against the trouble, cost, physical difficulty, and time by taking some reasonable measures for avoiding the risk. It is the principles that can be also used as a loss prevention objective in a company (Chance & Brooks, 2015)....