Basic purpose and scope of Risk Management

Question 1

What is Risk Management?

Answer 1

The efforts of organizations and individuals efficiently and effectively assess, control, and finance risk in order to minimize affects of losses or missed opportunities.

Question 2

What is the difference between risk management for individuals VS organizations?

Answer 2

Individuals risk management is usually an informal process. (ex. insurance or a savings plan)
Organizations have a risk management systems that cover organizing, leading, and controlling resources and activities to prevent losses.

Question 3

What is Traditional Risk Management?

Answer 3

Focuses on pure risk and excludes from its scope all losses that would arise from speculative risk. (Focused on managing safety, purchasing insurance, and controlling financial recovery from hazard risk)

Question 4

What is ERM?

Answer 4

Enterprise-wide Risk Management.
Encompasses all types of risk. Manages an organizations key risks and opportunities with the intent of maximizing the organizations value.
Occurs at the enterprise level rather than the departmental or business unit level.

Question 5

All risk management processes are designed to assess, control, and finance risk.
TRUE or FALSE?

Answer 5

TRUE