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Risk management is the process of identifying, assessing, and mitigating potential risks that could affect an organization’s ability to achieve its objectives. It involves strategies like risk avoidance, transfer, reduction, and acceptance, as well as frameworks like Enterprise Risk Management (ERM) to embed risk awareness in business decisions. Financial risk management covers exposure to market fluctuations, interest rate risks, and economic uncertainties. Effective governance ensures transparency, accountability, and strategic alignment in managing risks.
Managing risks to achieve corporate objectives.
Traditional view: avoiding loss (downside risk).
Modern view: leveraging opportunities to enhance returns (upside risk).
Aligns risk management with business strategy.
Encourages a risk-aware culture and accountability across the organization.
COSO framework defines ERM as an enterprise-wide process to manage risk within the entity’s appetite.
Uses PEST and SWOT analysis.
Risk register records risks, likelihood, impact, and mitigation measures.
Methods: internal audit, expert advisors, brainstorming, regression analysis, and simulation analysis.
Transfer: Shift risk to another party (e.g., insurance).
Avoid: Eliminate risky activities.
Reduce: Minimize exposure through controls.
Accept: Recognize manageable risks.
Balancing costs and benefits of risk controls.
Ensuring alignment with company objectives.
Monitoring and adjusting strategies as necessary.
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