Risk Management Definition

Risk management in insurance involves identifying, assessing, and mitigating risks to minimize their impact on an organization or individual. It focuses on understanding and controlling potential risks that could lead to financial losses or liabilities. Key steps include identifying risks like property damage or liability, assessing their likelihood and severity, and implementing strategies to manage them.

These strategies may include risk avoidance, reduction, transfer (such as through insurance), or retention. Effective risk management helps insurers and policyholders prepare for potential risks, reduce financial impact, and ensure business continuity. It’s a proactive approach that requires ongoing monitoring and adjustment to address evolving risks and market conditions, enhancing resilience and protecting against unexpected events.