What is the overarching purpose of risk management?

The overarching purpose of risk management is to establish a framework for identifying, analyzing, and responding to risks in a way that aligns with an organization's objectives. This decision-making process helps organizations to effectively manage both threats and opportunities, allowing for informed choices that can enhance the likelihood of achieving strategic goals.

By focusing on effective management, risk management does not imply the complete avoidance of risks, as this is often neither possible nor practical. Instead, it emphasizes understanding risks and implementing controls to mitigate their impact or to take advantage of potential opportunities. Additionally, while monitoring organizational activities is an important aspect of risk management, it is not the primary purpose. Risk management is not solely about identifying rewards, but about balancing risk and reward in a decision-making context that prioritizes the organization's overall well-being.