Risk management: a system for managing potential losses

The main goal of any business is to get the maximum possible profit with minimal risks. The management system for potential losses is called risk management. It consists of two subsystems - the object of control and the subject of control. Risks arising as a result of investment activity or in the process of economic relations between business entities are subject to management.

Professionals engaged in risk management are subjects.

Risk management performs a whole range of functions:

- forecasting and planning, consisting in the development of measures to maintain the level of risk within the planned;

- organization - creation of a special structure within the framework of the enterprise that manages risk;

- motivation - a system of incentives for professionals to effectively apply management decisions;

- control - analysis of the effectiveness of ongoing measures to reduce the level of risk;

- regulation and coordination - adjustment of programs and their implementation through effective delegation and distribution of responsibilities.

There are several methods of risk management. Risk management uses them depending on the tasks assigned:

- if the level of risk is too high, then the method of failure is most effective;

- if it is possible to reduce it, then diversification and hedging, capital or quality management are applied;

- partial or complete transfer of risk is possible, for example, to an insurance company;

- the method of adoption presupposes the formation of reserve or insurance funds or the implementation of other methods that will level out possible risks.

Types of risks can be:

- strategic, based on the long-term development of the enterprise;

- operational, arising directly in the process of implementing a project or carrying out economic activities;

- financial, associated with losses of capital;

- reputational, determining the status of an enterprise in the market.

Depending on them, certain categories of this concept are formed. Thus, financial risk management is used in investment activities, and is also the basis for the functioning of various credit and financial organizations.

Priority directions of risk management are determined depending on the overall assessment of external and internal factors that affect the potential risks in the activities of a particular enterprise.

The main task of risk management is the recognition and classification of risks, the choice of instruments and methods of insurance against them, their minimization or complete abandonment of projects if there is a high likelihood of significant losses. Effective risk management is the main platform for a successful and profitable enterprise development. Therefore, we should pay maximum attention to this! Now you have basic information that will help you move in the right direction.