Which definition best describes risk management?

The definition that best describes risk management is centered around a systematic approach to identifying, assessing, and reducing risks that could negatively impact an organization or individual. This process involves evaluating potential risks and implementing strategies and policies aimed at minimizing their likelihood or impact.

Risk management encompasses a variety of techniques, such as risk avoidance, mitigation, transfer, and acceptance, to ensure that risks are effectively managed rather than left unchecked. It is crucial in fields like insurance, finance, and safety, where understanding and controlling risks can significantly enhance decision-making and create more favorable outcomes.

Other definitions presented do not capture the essence of risk management. Evaluating financial outcomes relates to a specific aspect of risk assessment rather than the overall process. Ignoring risks contradicts the fundamental purpose of risk management, which is to be proactive rather than dismissive. Lastly, creating new risks for coverage is counterproductive, as risk management aims to handle existing risks rather than generate new ones for the sake of insurance coverage.