Unfortunately such high degree of risks can bring negative impact on the profitability as well as to the future success of the organizations. So to protect from such bad consequences it is essential for such organization as soon as possible to find an appropriate solution so that they could handle or manage risks in better way which in otherwise could bring catastrophe to them. So a desirable solution is through applying appropriate sets of procedures or policies at proper intervals. Risk management is one such effective strategy that to a great extent can minimize or reduce various types of risks that an organization has to face while carrying out its operations. By adopting such strategy an organization can ensure its better success and growth in the future. Viewing this importance the paper attempts to describe what is risk management or risk management decisions, the direct and indirect costs and benefits of risk management decisions to an organization and how they can be measured.
Risk management or risk management decisions are a logical process that aims at eliminating or minimizing the level of risk pertained to any business operations. In other words it can be told as a series of process that comprises of identifying, analyzing, and implementing necessary steps so as to minimize or eliminate the exposures to risk of loss that are to be faced by an organization. The practice of risk management makes use of number of tools and techniques, and also the concept of insurance, in order to manage the different types of risks. The duty of carrying out the process of risk management is entrusted to the concerned department of corporate risk management, who firstly identifies what are the various potential sources that cause to trouble, after identifying the corporate risk managers analyzes each of the sources carefully and then finally after analyzing they take precautionary measures or steps to overcome from such exposure of losses.
The term risk management is known to be a "relatively a recent evolution of the concept to insurance management" (Sullivan, 2009, P. 452). The concept risk management that comprises of broader scope of activities and responsibilities than what the insurance management actually dealt with. The uses of Risk management was initially applied by the organizations to protect from various physical threats which occurs while carrying out their operations such as theft, fire, flood, legal liability, disability, employee injuries, car accidents, and many which otherwise took number of years to protect themselves from such risks and in turn which would bring barriers to their day-to-day operations and profitability. It was seen as the 20th century ended; the activities of risk management were much more expanded to the areas of financial risks such as interest rates, exchange rates, and now e-Commerce.
As mentioned earlier risk management as a process risk management involves several series of steps where the concerned corporate risk management department of an organization identifies, analyzes, treats and monitors the risks which are involved in carry out their any business operations (Culp, 2001). These entire processes were carried out by the organizatio