What is risk management?

The concept of risk management primarily focuses on the systematic approach to identifying, assessing, and prioritizing risks that an organization may face, followed by coordinated efforts to minimize, monitor, and control the likelihood or impact of these risks. This process helps organizations understand potential threats and opportunities in order to make informed decisions that can safeguard their assets and achieve their objectives.

By effectively identifying and assessing risks, a company can develop strategies that mitigate or eliminate potential negative impacts while capitalizing on potential opportunities. This is crucial in financial management, where market conditions, regulatory changes, and operational challenges can all pose risks to profitability and sustainability.

The other options do not accurately encompass the essence of risk management. While maximizing investment returns might be an outcome of effective risk management, it is not the primary focus. Similarly, enhancing company mergers or predicting market changes falls outside the scope of risk management as a holistic process.