Question

In: Finance

What is the risk management process? What are its disadvantages and advantages?

What is the risk management process? What are its disadvantages and advantages?

Solutions

Expert Solution

Risk management process is the strategical plan to reduce the risk at its acceptable level and increase the earning opportunities. This process includes analyses the sources of risk, impact of risk and tools to reduce the risk at acceptable level with the minimum cost. Risk management process includes reporting to the senior managers as well about the risk available and plans to remove or reduce the risk.

Advantages of risk management process:-

1. Risk can be treated within given period of time.

2. Minimization of unexpected risk.

3. Help to develop successful business strategies.

4. Saving time and cost of the organisation.

5. Protection of company resources.

Disadvantages of risk management process :-

1. Calculation is risk identification and analyses is rather complex.

2. Degree of uncertainty involve in the process of risk management.

3. Implementation of risk management process is difficult due to resistance to change.

4. In the process of planning company has to depend on the external sources as well which are sometimes not reliable.

5. There are chances of unmanaged losses due to involvement of higher cost.


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