CONCEPT OF RISK MANAGEMENT
The term “Risk” as a noun means a situation involving exposure or danger and as a verb means expose to danger, harm or loss. It is said that the word Risk is derived from the early Italian word “risco” which means danger or “risicare,” which means “to dare” or French word “risqué”. Risk is known or unknown but is always inherent in individual or business actions therefore it is more of a “choice” rather than a fate accompli.
Risk and reward are two sides of the same coin. Good Risk leaders select their actions well or take calculated risks. They evaluate risks carefully and take actions with full cognizance of consequences. They integrate decisions with corporate strategy, and strike a healthy balance between risk management as an opportunity and a protection shield.
According to "Risk Management: History, Definition, and Critique," the modern terms for managing risk rose after World War II, but the discipline mostly began as a study of using insurance to manage risk. Later, from the 1950s to the 1970s, risk managers began to realize that it was too expensive to manage every risk with insurance, so the discipline began to expand to alternatives to insurance. For example, training and safety programs might be considered insurance alternatives. Regulators started recognising the relevance and significance of the subject of risk management and started prescribing advisories from 1980s; however, the awakening and intensity of detailed regulatory interventions came about greatly post the global financial crisis in the year 2007.
Each strategy and business action is accompanied with its expected risk and reward. Good risk management therefore does not imply avoiding all actions and associated, rather it implies making informed and coherent choices. The risks that the organization wants to take in pursuit of its objectives and in particular choices it makes to manage and mitigate those risks.
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