Risk Management Process with Examples

What is Risk Management Process?

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

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

Example of Risk Management Process

We can always discuss an example of a Risk Management cycle for a Bank. In the first step, the Bank identifies all possible risks and then the whole risk controlling 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 RMP. And all practical risk controlling revolves around it. While somewhat different/ varied steps are followed in implementation, it is beneficial for risk professionals to know the core process.