Function of Risk Management

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  • Risk Management Function
    • Definition
      • Process of analysing a business' exposure to risk and determining how to best handle and minimise such exposure
      • To have a responsible and successful business- risk management plan to protect people and physical assets
      • Pure risk- Threat of loss over which business has no control (legal fraud, theft and uncertainty in financial market). Speculative risk- chance exists of making profit/loss but business calculates those risks
        • Reduce the risk- loss prevention programmes introduced (sprinkler for fire) Avoid risk- Business will try and aviod risk. Self-insure against risks- sets aside funds cover a loss in event of fire, Insure against risks- Bear risk of fire for a premuim
    • Role of Risk Management Function
      • First threats or risks identified, second vunrability of assets in relation to identified threats examined. Then figure out ways to reduce risk and prioritise risk management procedures on importance
      • Forulate a strategy for management of that risk- budgeted for, transfer risk to another party by insurance, closing down high-risk area to avoid risk or risk's negative effects reduced

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