Risk Management Is Essential To Survive

If a small kid is thrown in the river, he will try to swim even if he has never learned swimming before. Many people belonging to the old school of thought taught their kids swimming this way. They imparted real skills of survival to their children and most of the times, their lessons were tough and were based in the real time. The life was tough and there was no time for assessment and learning. Families were always struggling to survive the various challenges they faced. Natural calamities were the biggest hurdles they faced.

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Risk assessment evolved slowly

But with the evolution of cities and the industrial revolution, now people have many more challenges and now almost every aspect of our life is governed by laws and regulations. Before we take any decision, it is important to think about the consequences and how it will impact the life in the long term. Survival of fittest as the basic theory still applies. If we use the same example given above, today’s parents would equip their child with a safety life jacket or floater ring and be around while the child learns swimming from a trained instructor.

Being aware of risks is good

We can see that people are more aware and careful about the risks that may challenge their decisions and they are better prepared to face the future. The same thing applies to business and finance as well. This is called risk management. It is not enough to identify the risks that might be present or may challenge the company in future. It is critical to analyze any probability of a mishap and then find ways to mitigate that to the best possible extent.

Risk management in the corporate world

Risk management is a part of the corporate world and even the smallest family held companies follow some kind of management strategy to avoid risks or find solutions for the same. We can see examples in the corporate world when a small company opts to invest its money in a safe scheme even if it brings in less interest as the safety aspect is important. Banks always ensure that they strictly follow all guidelines and adhere to regulations so that no fraudulent transactions can take place. People do not stick to only one investment plan or put all the eggs in one basket. They ensure diversification of funds to safeguard their investments.

Companies have to complete, risk assessments periodically and then devise a strategy for risk management. These steps make sure that the company can face the challenges that come in its way, as that is inevitable. However, this also helps it to fight and overcome the challenges with the help of risk management methods in place.


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