Which of the following best describes risk management?

The best description of risk management is the process of identifying, assessing, and prioritizing risks. This definition captures the essential components of risk management, which involves not only recognizing potential threats to an organization or project but also evaluating their likelihood and impact. By prioritizing these risks, organizations can allocate resources and develop strategies to mitigate or manage them effectively.

This approach emphasizes the proactive nature of risk management, indicating that organizations need to understand their risk landscape and make informed decisions to minimize adverse effects. Risk management is not about eliminating all risks, as that is often impractical or impossible; instead, it focuses on managing risks to acceptable levels in order to enhance opportunities and achieve objectives.

In contrast, methods that suggest the total elimination of risks are unrealistic in most scenarios, as risk is inherent in almost all activities. Ignoring potential risks defeats the purpose of risk management, which aims to create awareness and preparedness. Lastly, a strategy to increase risks for better outcomes is contrary to the objective of risk management, which seeks to reduce and control risks, not amplify them.