What are the definitions, methods and goals of Risk Management?

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Karyth Cara eNotes educator| Certified Educator

Risk in business is defined as the possibility of future set backs, loss of profitability, investment loss, and other harm. Many managers qualify the definition of risk be adding that with the potential for loss comes the concomitant possibility of opportunity.

Risk management is the calculated assessment of risk followed by a systematic program of risk aversion through protective and hedging actions. The goal of risk management being to minimize the risk of loss or harm by maximizing hedging opportunities. Steps are taken to protect and hedge in all five risk areas: credit, investment/market, business, business operating, and legal risks.

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