Risk management embraces the efforts taken to minimize the impact of uncertain events. Risk management can be defined as “Identification, analysis & economic control of those risks which can threaten to the assets or the earning capacity of an enterprise”.
The definition has focused three fold nature of risk management; firstly risk must be identified before measured; only after their impact has been evaluated, one can decide on the most effective method of control. Cost of control of risk must be commensurate with the benefit expected to be derived.
It also mentions the assets and the earning capacity of the organization. These assets can be human or physical; they are both important and risk management must be seen to have a part to play in both. However, risks do not strike at assets directly and for this reason the definition also mentions the earning capacity of an enterprise.
The emphasis of the risk management is on reducing the cost of handling risk by whatever means that are considered most appropriate and insurance is viewed as simply one of the several approaches for minimizing the pure risks the firm faces.
Source:-Final Year Project