Risk Management Definition
Risk is nothing but the loss arising as outcome of certain factors in business. There are internal external factors affecting the business however these factors when are out of the control of the business are known as Risks. These types of factors are classified as Risks for either accepting them or handling them in the best possible manner. This activity of deciding the treatment of such risk is called the Risk Management and unknown factors.
There are various strategies to deal with the risks and the business either decides to live with the risk (accepting the risk) of deal with it by covering it through various means. If the risk can be avoided without affecting the business then the same is also opted for risk management.
What is Risk Financing Tool
It is a way of financing the losses of the company by using the resources to ensure that the losses are managed and also the functioning of the company is not affected by the same. The Risk Financing can be done by using the reserves created or it can be done through Insurance policy also. It is the plan to meet the losses in the crisis and also to see the continuity of the business.
Incase of the internal resources, the reserves are created by setting aside some part of the excess on a regular basis and using the same at the time of crisis. While the in case of Insurance the cover is drawn and premium is paid as expenses on a regular basis as and when due – Payday Loans Near Me