What does "risk management" in a business context involve?

Risk management in a business context involves identifying, assessing, and mitigating potential risks that could negatively affect the organization. The primary goal is to minimize the likelihood of adverse events and their consequences by implementing strategies and controls. This approach ensures that the organization can navigate uncertainties effectively, safeguarding its assets, reputation, and overall mission.

Choosing to focus on identifying and mitigating risks emphasizes the proactive measures organizations take to protect themselves. It entails a systematic process of recognizing potential threats—be they financial, operational, strategic, or compliance-related—and developing strategies to address these threats before they materialize. This aspect makes risk management fundamental to sustaining business continuity and fostering a healthy organizational environment.

In contrast, maximizing profits is a broader objective that doesn't specifically address how to handle potential risks. Evaluating employee performance and establishing company policies, while important, do not encapsulate the essence of risk management, which is centered around the identification and mitigation of risks that could hinder the company’s success.