What is Risk Management? - Explained

What is Risk Management? - Explained

Risk is extremely commonly heard term or a name in the corporate world. At a moment it's a cost for a one party and it's a business for another party. While a group of people failing due to failure in operation or something which impacts their business, there are other groups who get really good amount of cash out by handling and managing the cost of failure.

Depending on the global needs and wants, risk management is deviating over the price points where actual demand in hunger. The growing demand is coming out of the people and small, medium and large enterprises daily. Just because they don't want to engage on risky activities.

Risk Management is can be interpret as the minimizing or managing the cost of failure at a task. Due to many reasons there are many organization who does manage risk in the daily operation life cycle very strategically. The reason why organizations do manage risk is due to reduce the failure cost of a product, service or operation in the real world.


You might have seen or heard the term of outsourcing. Or you might have worked for an outsourcing company. Outsourcing is done by medium and large enterprise businesses in the world to eliminate the risk to another party.

Outsourcing is done with many reasons. Major fact is that the firm who is outsourcing the task could not have the capability to provide necessary needed skill set to do the task in house. In these cases the outsourcing company do a deep analysis about organization who is planning to take the outsourced job to evaluate that do they have the right set of skills. 

The organization who takes the opportunity of getting it done with the right set of skills and technologies. 

For an example, there could be telecommunication company who wants a human resource management system to be developed. But rather developing the product in house within the telecommunication company's, the entire process could be outsourced to another organization who have done something similar and do have better experience.


We insure our car, house, life, pet and anything which is possible to insure our life. This is to forward the risk of funding the hospitalization fee if you, your family member or somebody got sick. We insure car to get a new car without paying the same amount as the car. We insure our business building to protect the damage which we got from a fire. We insure the cargo shipment to forward the risk to another party in any case if the ship sunk.

Insurance companies do charge a fee for the insurance of whatever you need to make. In this insurance plan they include what they will pay for you if something goes wrong. How insurance companies do repay you if something goes wrong is, they invest the amount you pay for the company as a fee in different investment routes. It could be treasury bonds, Public Limited Liability Company shares or bank lending.

As individuals we could have done the same. We could have done the investment by our own and we could have make virtual insurance for our self without depending on a insurance company. But we might not have the right skill set to do efficient and profitable investment plan by our self. Which could be a risk of failure and since we need to manage the risk of failure, we forward the risk to another party.

Wealth Management

You could be winning a lottery anytime. It could be a huge amount of cash that you might receiving as the grand winner. The cash prize that you could receiving could be a amount of money that you haven't hold in your bank account ever in your lifetime. You could be millionaire with that much of cash. But there's a chance that you could become a billionaire within a year or so investing the amount of cash right on spot. But there's a risk where you couldn't get to there and go bankrupt without investing the cash right on spot.

Wealth management is a profession to plan the wealth investment and gain the best possible income. Which means you do have the simplest possible way to forward the risk of managing your wealth to another party or an organization. If Something goes wrong and you are not the person who took the risk. Many wealth management firms do have a insurance plan to make the organization to move sustainable and to keep their clients safe as possible.