Risk mgmt is how business leaders identify, assess, and control threats to their organization's earnings and capital. These could be economic, compliance, security, reputational, financial, competitive, operational, or strategic threats. They could also come from inside or outside the company.

Organizations must know the exact threats they face and determine their scope. Next, they must prioritize the threats using quantitative or qualitative risk assessment methods. Doing this helps reduce the threat's impact on the organization and prevent it from occurring in the future.

One strategy organizations use to deal with risks is avoidance. As the name suggests, avoidance means that the organization does not indulge in activities that may affect them negatively. Depending on the situation, this might include not launching a new product line or holding off on a new investment. While this method might work sometimes, it might not apply in all cases because many beneficial opportunities come with risks.

Organizations can also choose risk reduction to minimize the threat's effects. This method mostly applies to threats that the company cannot control, like changes in market policies, climate change, or political matters.

A third way of dealing with threats is risk sharing. Risk sharing means spreading the risk to many people, reducing its effects on everyone. This method also helps reduce the cost of managing the risk for everybody.

One of the most common examples of risk sharing is when an organization offers an employee insurance program and requires the employees to pay a fraction of the premiums. The organization shares the risk with the employees, making it more cost-effective for everybody in the long run.

Another way an organization can manage risk is by transferring it to a third party. The most common type of risk transfer is insurance. Insurance companies assume financial risk on behalf of the organization in exchange for the premiums and a binding contract.

When dealing with minor risks, some organizations prefer to save costs and retain the risk instead of transferring it to a third party. They do this mostly when the cost of dealing with the risk in-house is less than seeking insurance coverage.

The final part of risk mgmt is monitoring and evaluation. This step involves determining whether the mitigation method works and whether the company should change or maintain it. It also involves monitoring risks that are always present, like political, environmental, and market risks, to ensure they stay ahead.