Businesscalendar_todayLast updated: Apr 2026
What is Risk Management?
/rɪsk ˈmænɪdʒmənt/
The process of identifying, assessing, and controlling threats to an organisation's capital, earnings, or strategic objectives — balancing the cost of mitigation against the probability and impact of outcomes.
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Everyday Example
A cyclist wearing a helmet isn't afraid of falling — they've assessed the probability and severity of the risk, and decided the cost of the helmet (low) is worth the protection against the outcome (head injury).
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“After the 2008 financial crisis, regulators required banks to hold significantly more capital as a buffer against losses. This was risk management at a systemic level — accepting lower returns in exchange for reduced collapse probability.”
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Did you know?
Modern risk management emerged from the insurance industry in the 17th century. Lloyd's of London began as a coffee house where merchants shared shipping risks. The concept of pooling and pricing risk created the financial system.
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Key Insight
The risks that destroy organisations are rarely the ones they're managing. The 2008 crisis wasn't caused by known risks — it was caused by risks that fell outside models because they had never happened before.
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