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Risk Management Process with Examples

Risk management includes the sequence of activities to reduce or eliminate an entity’s potential risk. Read below & understand with an example.

What is Risk Management Process?

Risk management includes the sequence of activities to reduce or eliminate an entity’s potential risk. While there are many versions available for a Risk Management Process, one popular version includes the following steps:

  • Risk Identification
  • Risk Measurement
  • Risk Mitigation and Implementation
  • Continuous Monitoring

Example of Risk Management Process

An example of a Risk Management cycle can be discussed for a Bank. In the first step, the Bank identifies all possible risks and then the whole risk management process for all identified risks. Let’s take the example of Credit Risk. After identifying the credit risk, the Bank will develop Credit Risk Models to measure the Credit Risk Impact. The Risk Measurement tools will be implemented in the subsequent impact, and additional risk mitigation strategies are adopted, such as asking for collateral. In the last step, the Bank will keep monitoring if the implemented systems are still relevant or not.

Why is it essential to know Risk Management Process?

A Risk Management Process forms the core of Risk Management, and all practical risk management revolves around it. While somewhat different/ varied steps are followed in implementation, it is beneficial for risk professionals to know the core process.

Owais Siddiqui
1 min read
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