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Risk management

Risk management is the identification, assessment, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risk management’s objective is to assure uncertainty does not deflect the endeavor from the business goals.

Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters, deliberate attack from an adversary, or events of uncertain or unpredictable root-cause. There are two types of events i.e. negative events can be classified as risks while positive events are classified as opportunities. Several risk management standards have been developed including the Project Management Institute, the National Institute of Standards and Technology, actuarial societies, and ISO standards. Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management, security, engineering, industrial processes, financial portfolios, actuarial assessments, or public health and safety.

Risk sources are identified and located in human factor variables, mental states and decision making as well as infrastructural or technological assets and tangible variables. The interaction between human factors and tangible aspects of risk highlights the need to focus closely on human factors as one of the main drivers for risk management, a "change driver" that comes first of all from the need to know how humans perform in challenging environments and in face of risks (Daniele Trevisani, 2007). As the author describes, «it is an extremely hard task to be able to apply an objective and systematic self-observation, and to make a clear and decisive step from the level of the mere "sensation" that something is going wrong, to the clear understanding of how, when and where to act. The truth of a problem or risk is often obfuscated by wrong or incomplete analyses, fake targets, perceptual illusions, unclear focusing, altered mental states, and lack of good communication and confrontation of risk management solutions with reliable partners. This makes the Human Factor aspect of Risk Management sometimes heavier than its tangible and technological counterpart»

Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat, and the opposites for opportunities (uncertain future states with benefits).

Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk; whereas the confidence in estimates and decisions seem to increase. For example, it has been shown that one in six IT projects experience cost overruns of 200% on average, and schedule overruns of 70%.

Risk Management (magazine)

Risk Management is a magazine dedicated to issues of interest to practicing risk managers. It is published by the Risk and Insurance Management Society.

The editor-in-chief is Morgan O'Rourke.

Longman Dictionary of Contemporary English

risk management

▪ A risk management program means all programs to minimize extraordinarily hazardous accident risks.
▪ Computer system users can not control risk management decisions, but suffer big losses when inadequate protection fails to avert catastrophe.
▪ He became the risk management director and its labor relations chief.
▪ Mr Wilson, 41 years old, had been general manager of risk management.
▪ Several have human resources consultancies, while Eversheds recently set up a risk management consultancy.
▪ The cost of exchange rate risk management does not vary significantly with firm size.
▪ The objective is to instil an awareness of risk issues and basic methods of risk management.
▪ Uncertainty is a feature of many aspects of risk management.

risk management

n. The process of determining the maximum acceptable level of overall risk to and from a proposed activity, then using risk assessment techniques to determine the initial level of risk and, if this is excessive, developing a strategy to ameliorate appropriate individual risks until the overall level of risk is reduced to an acceptable level.

Usage examples of "risk management".

Many of those jumping off the 105th floor worked for Aon, a worldwide insurance and risk management company.

That's because Miami slashed its overworked risk management department so severely that it can no longer afford to contest most injury claims.

I could've done without the ambulance ride, but Risk Management said I had to.

Perhaps that was his way of showing the strain of the terrible things he'd seen and done, or maybe it was just teenage male hormone poisoning turning off his brain's risk management centers.

Restricting contact between the men and the locals was deemed advisable in terms of risk management.