Risk Management
                     WHAT IS RISK 
MANAGEMENT AND ITS 
IMPORTANCE IN BIG 
CORPORATIONS?
What Is Risk Management?
 Risk management encompasses the identification, analysis, and response to risk factors 
that form part of the life of a business. 
 Effective risk management means attempting to control, as much as possible, future 
outcomes by acting proactively rather than reactively. 
Source: corporatefinanceinstitute.com
Potential Impact
 Effective risk management offers the potential to 
reduce both the possibility of a risk occurring and its 
potential impact.
Source: corporatefinanceinstitute.com
Risks Management Structures
 A good risk management structure should also 
calculate the uncertainties and predict their influence 
on a business. 
 Consequently, the result is a choice between 
accepting risks or rejecting them. 
Source: corporatefinanceinstitute.com
Response to Risks
 Avoidance: A business strives to eliminate a particular 
risk by getting rid of its cause.
 Mitigation: Decreasing the projected financial value 
associated with a risk by lowering the possibility of the 
occurrence of the risk.
 Acceptance: In some cases, a business may be 
forced to accept a risk. 
Source: corporatefinanceinstitute.com
Importance of Risk Management
 Risks management is an important process because 
it empowers a business with the necessary tools so 
that it can adequately identify and deal with potential 
risks. 
 Once a risk’s been identified, it is then easy to 
mitigate it.
Source: corporatefinanceinstitute.com
Progressive Risk Management
 Progressive risk management ensures risks of a high 
priority are dealt with as aggressively as possible. 
 Moreover, the management will have the necessary 
information that they can use to make informed 
decisions
Source: corporatefinanceinstitute.com
Risk Analysis Process 1
 Identify existing risks: Risk identification mainly 
involves brainstorming. A business gathers its 
employees together so that they can review all the 
various sources of risk. 
Source: corporatefinanceinstitute.com
Risk Analysis Process 2
 Assess the risks: problem resolution involves identifying the problem and then finding an 
appropriate solution. 
 However, prior to figuring out how best to handle risks, a business should locate the cause of 
the risks.
Source: corporatefinanceinstitute.com
Risk Analysis Process 3
 Develop an appropriate response: Once a business 
entity is set on assessing likely remedies to mitigate 
identified risks and prevent their recurrence.
Source: corporatefinanceinstitute.com
Risk Analysis Process 4
 Develop preventive mechanisms for identified risks: 
Here, the ideas that were found to be useful in 
mitigating risks are developed into a number of tasks 
and then into contingency plans that can be deployed 
in the future.
Source: corporatefinanceinstitute.com