Risk management is the process through which an organization identifies, evaluates, addresses, and monitors potential risks that could hinder its goals or jeopardize its operations, assets, reputation, or stakeholders. The goal isn't to eliminate all risks but to understand them, enabling informed decisions that align with the company’s risk appetite—the amount of risk the organization is willing to take on to achieve its objectives.

This field covers both financial and operational activities that aim to increase company value by minimizing the costs associated with risks, such as financial instability, risk premiums, or possible regulatory fines. Corporate risk management generally involves:

1. Identifying potential risks (e.g., market, regulatory, operational, reputational, and financial risks).
2. Assessing the likelihood and impact of these risks.
3. Prioritizing the most critical risks.
4. Mitigating or managing risks through strategies like diversification, insurance, hedging, or process improvements.
5. Ongoing monitoring and review of risks and controls.

Effective risk management is woven into the company’s governance and strategic planning, with oversight typically provided by the board of directors. It plays a crucial role in corporate governance, helping to bolster the organization’s ability to meet its goals and ensure long-term stability and success.

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