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In this competitive world the necessity of risk management is a very important task for any business to be successful in that particular industry. Businesses are supposed to prone with different types of risks. Some risks arise due to the uncertainty in the macroeconomic activity and others arise due to the firm specific activity (Rejda et al. 2013).
1 Role of Risk Management
1.1 Why risks need to be managed?
The necessity of managing risks beggar description. So, there should be detailed process in understanding the necessity of managing risks. In managing risks, first of all it is important to identify the all possible risks that might arise for a business. For example, a business should identify all kinds of risks which can affect its profitability and sustainability.
Another important aspect in managing risks is the probability of hampering business activity by any risks. Not necessarily all risks are going to affect businesses equally. So, businesses should first find out all risks and then weight their probability of hampering business activity.
Then comes the ways and means in which the business will mitigate its probable risks. The better the management of risks, the higher the profit potential and sustainability of a business (Blog method123.com 2010).
In order to identify risks business should know the types of risks. There are different types of risks: some are direct like natural disaster, legal, environmental, health and safety related, online security, intellectual properties, economic and financial risks etc, some indirect such as problems faced by suppliers, customers change in tastes, operational changes etc; some are related to hazards, some with uncertainty and some might even occur with the foregoing of any opportunities. Any business should carefully observe it s internal and external
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