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What is Risk management? What are the objectives of Risk management? What are advantages and disadvantages of Risk management?

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What is Risk management?

Risk management is a continuous, forward-looking process of identifying, evaluating and managing risks in the organization.

The risks can come from a number of sources, including financial uncertainty, legal debt, management errors, risks and natural disasters.

It is followed by the use of integrated resources and savings to reduce, monitor, and control opportunities.


State the objectives of Risk management.

Here is a list of 10 objectives of risk management:

  1. It prepares for potential losses in the most economical way.
  2. Risk Management helps to reduce and eliminate threats and anxiety.
  3. Risk management helps to meet any legal obligation.
  4. It helps to continue important operations in the firm even after the loss.
  5. Furthermore, it enhances the better understanding & communication of risk in organization.
  6. It provides the ability to operate the firm/business to provide services after a loss.
  7. Not only that, but it helps in the stability of earnings. Earning per Share can be maintained if the firm continues to operate.
  8. It helps to continue the growth of the firm with the introduction of new products and markets.
  9. Risk management supports the efficient use of available resources for betterment of the organization.
  10. It helps business to compete in the market. Otherwise, the firm will be lost to its competitors.

Advantages of Risk management:

There are many advantages of risk management. Here are some of:

  • Identify the potential risks and eliminate.
  • Reduces the liability of firm.
  • Meet legal obligation.
  • Better understanding and communication of risk.
  • Stability of growth and earning.
  • Efficient use of available resources.

Disadvantages of Risk management

Here is list of disadvantages of risk management:

  • Risk Management is expensive.
  • Cost of Training adds to the finance.
  • Need to focus on security of analysis and data.
  • Not Suitable for all Organizations.
  • Automation is also taking place of risk management due to various reason.

Advantages v/s disadvantages of Risk management

Risk Management Advantages and Disadvantages
Image source: wisestep.com

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