There are different types of risk management and the characteristics and procedures of each type of risk management is different from the other. All these risk management processes play a significant role behind the growth of an organization in the long term.
About Types of Risk Management
Commercial enterprises apply various forms of risk management procedures to handle different risks because they face a variety of risks while carrying out their business operations. Effective handling of risk ensures the successful growth of an organization.
Various types of risk management can be categorized into the following:
Operational risk management: Operational risk management deals with technical failures and human errors
- Financial risk management: Financial risk management handles non-payment of clients and increased rate of interest
- Market risk management: Deals with different types of market risk, such as interest rate risk, equity risk, commodity risk, and currency risk
- Credit risk management: Deals with the risk related to the probability of nonpayment from the debtors
- Quantitative risk management: In quantitative risk management, an effort is carried out to numerically ascertain the possibilities of the different adverse financial circumstances to handle the degree of loss that might occur from those circumstances
- Commodity risk management: Handles different types of commodity risks, such as price risk, political risk, quantity risk and cost risk
- Bank risk management: Deals with the handling of different types of risks faced by the banks, for example, market risk, credit risk, liquidity risk, legal risk, operational risk and reputational risk
- Nonprofit risk management: This is a process where risk management companies offer risk management services on a non-profit seeking basis
- Currency risk management: Deals with changes in currency prices
- Enterprise risk management: Handles the risks faced by enterprises in accomplishing their goals
- Project risk management: Deals with particular risks associated with the undertaking of a project
- Integrated risk management: Integrated risk management refers to integrating risk data into the strategic decision making of a company and taking decisions, which take into account the set risk tolerance degrees of a department. In other words, it is the supervision of market, credit, and liquidity risk at the same time or on a simultaneous basis.
- Technology risk management: It is the process of managing the risks associated with implementation of new technology
- Software risk management: Deals with different types of risks associated with implementation of new softwares