Risk Management

Definition

  • The process of identifying, assessing, and prioritizing risks and the identification of methods to manage them economically and/or effectively. Strategies commonly used in risk management include the transferring risk to other parties, reducing or eliminating risk altogether, or accepting the potential of risk and preparing for the consequences.

Synonyms
managing risk, insurance risk management

Related Terms and Acronyms

  • Actuarial Table Definition,
    • A table used in actuarial science that outlines the statistical probability that an individual of a specific age and sex will die within a year.
  • Actuary Definition,
    • An individual who assesses the mechanisms, mathematics and complexities of risk and uncertainty.
  • Derivatives Definition,
    • Financial contracts whose value is derived from the value of some underlying asset, rate or index. Derivatives are used as risk-management tools by governments and corporations to reduce exposure to risk, mainly related to fluctuations in foreign-exchange and interest rates. Derivative instruments include swaps, options, futures and forward contracts and are used by banks in two principal activities: sales/trading and asset/liability management.
  • Mortality and Expense Risk Charge Definition,
    • A charge sometimes applied to reimburse an insurer for the risks in a policy.
  • Netting Definition,
    • The offsetting with a counter-party of financial obligations or payments one is owed with those one is entitled to receive, thus reducing the costs arising out of payment settlements. Netting is also used as a risk management tool to help counter-parties reduce their exposure to credit risk.
  • Self Insurance Definition,
    • Setting aside money or assets for a potential future loss.
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