Risk Management is primarily concerned with reducing the potential of any internal or external events to detrimentally affect the objectives of a business. It should be a set of continuous and developing processes that are applied throughout an organisation’s strategy. It should methodically address all the risks surrounding past, present and future activities.
There are two main areas of focus for a Risk Management function:
- Provide assurance to management of the awareness and control of current and future business risks;
- Safeguard business assets and reputation;
- Contribute to the improvement of the business’s operating performance and shareholder value;
- Improve efficiency through focusing on reducing risk exposure inherent in the business processes;
- To support the achievement of strategic goals.
- Compliance with regulatory requirements;
- Providing a competitive advantage;
- Provision of assurance to stakeholders and interest groups that risk is being actively managed.
Risk management is a tool that allows a financial institution to prosper through taking and avoiding risks. Companies are now taking a closer interest in what its management is doing to mitigate risk exposure – allowing for a more efficient, effective and prudently run business.