- Risk management is the process of managing an organization’s risks to achieve objectives in a manner consistent with public interest, human safety, environmental needs, and the law.
- Business risks are situations that can lead to financial gain, loss, or failure. Business risks fall into three categories: economic, natural, and human. Economic risks such as recession or population changes result from changes in overall business conditions. Natural risks such as floods or arson result from natural or sometimes human occurrences. Human risks are caused by human mistakes or things that can be controlled by humans, such as the working environment.
- Effective security and safety precautions, policies, and procedures include screening and training employees, providing safe conditions and accident management programs, and preventing external and employee theft.
- Businesses can manage the risk of financial loss in various ways, including loss prevention, control, transfer, retention, and avoidance.
- Insurance is a common way to transfer risks. A business pays premiums to an insurance company in exchange for a guarantee of full or partial compensation in case of losses. Common insurance policies for businesses include property insurance and liability insurance.