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Risk management is the identification, evaluation, and prioritization of
Risks can come from various sources including uncertainty in financial markets, threats from project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents,
Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat, and the opposites for opportunities (uncertain future states with benefits).
Certain aspects of many of the risk management standards have come under criticism for having no measurable improvement on risk; whereas the confidence in estimates and decisions seem to increase. For example, one study found that one in six IT projects were "
A widely used vocabulary for risk management is defined by ISO Guide 73:2009, "Risk management. Vocabulary."
In ideal risk management, a prioritization process is followed whereby the risks with the greatest loss (or impact) and the greatest
Intangible risk management identifies a new type of a risk that has a 100% probability of occurring but is ignored by the organization due to a lack of identification ability. For example, when deficient knowledge is applied to a situation, a
Risk management also faces difficulties in allocating resources. This is the idea of
According to the definition to the risk, the risk is the possibility that an event will occur and adversely affect the achievement of an objective. Therefore, risk itself has the uncertainty. Risk management such as COSO ERM, can help managers have a good control for their risk. Each company may have different internal control components, which leads to different outcomes. For example, the framework for ERM components includes Internal Environment, Objective Setting, Event Identification, Risk Assessment, Risk Response, Control Activities, Information and Communication, and Monitoring.
For the most part, these methods consist of the following elements, performed, more or less, in the following order.
Risk management should: