Risk management is the systematic process of identifying, assessing, and mitigating risks that could potentially impact an organization’s operations, assets, or reputation. It involves analyzing potential threats—ranging from financial uncertainties, legal liabilities, strategic management errors, accidents, and natural disasters—and implementing strategies to minimize their impact.
A robust risk management plan enables organizations to prepare for unexpected events by establishing protocols for risk response, which can include avoiding, transferring, mitigating, or accepting risks depending on their nature and severity. Effective risk management not only protects the organization but also ensures compliance with regulations, improves decision-making, and enhances overall organizational resilience.
For example, in recruitment, a company might identify the risk of hiring a candidate who may not align with its culture. To manage this risk, the company could implement more thorough vetting procedures, such as behavioral interviews and personality assessments, to ensure a good cultural fit.
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