To give the most understandable definition for the ‘risk management’ concept, it would be reasonable to say that it includes the process of identification, assessment and measuring of risk and then, at a result, working out the tactics to deal with it. As a general rule, the most common tactics include such processes as: shifting the risk to the other party, staying away from the risk, reducing the negative risk effect and resigning with the consequences of this or that risk.
The traditional risk management we are discussing here is concerned with a group of risks, based on physical or legal grounds. Among such risks there are reckoned natural disasters, deaths, fires, lawsuits, etc. When the question is about the risks concerning financial management, it can be managed by means of traded financial mechanisms.
Regarding the fact that there is a great number of risk management activities, the authority of all big corporations have organized special risk management teams in order to put into practice the risk management policy. To talk about the risk management mechanism, the best example of its functioning is the difficult process of balancing between the risks which have high chances of happening with lower loss against the risks with poor chances of happening but with high loss. In practice, everything can be very difficult, because it is rather a challenging task to handle such a balance.
The other part of the risk management policy lies in the fact that all resources should be properly allocated. The point is that one could spend the recourses which are allocated for the risk management for some more money-making activities.
To cut the long story short, ideal risk management lies in the…