Why is risk management necessary to an organization?

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Why is risk management necessary to an organization?

Introduction

Risk, in the simplest terms, implies the chances that something bad may happen affecting people or completion of a particular project. On one hand, risks affect people because they can no longer operate the same due to the new changes introduced by the risk. On the second hand, risk affects business performance because they can lead to loss of business operation capital. Additionally, risks are known for introducing uncertainties that are unpleasant for business operations. Hence risk needs to be controlled. Taking control of risk in a business is referred as risk management and takes many steps aimed at ensuring a business is not adversely affected due to an occurrence of unfeasible events (Carvalho et al., 2015). Managing business risk also entails a decision that business managers have to make on what to do in case of a risk occurring, for example, if a business anticipates a loss in sales, they should establish a prior plan on how to deal with such as risk. Comprehensive approaches to controlling business risks are considered as risk management. Organizations which do not manage risk perform very poorly in the global economy. The following are the reasons why risk management is essential for an organization.

Creates a secure work environment

First, workplaces cannot be secure without a well-planned risk management process. Workplaces are the only spaces where operations can be conducted. As such, when such important spaces were not managed well, the risk may rise and every person working within (Carvalho et al., 2015). For example, during this period of the world pandemic, many organizations have put measures that are aimed at helping them to safeguard workers...