The term "risk" describes the probability of an undesirable event happening as a result of a present decision or of some future event.
In life, we face multitudes of these risks. There are risks that we would readily take while there are also those that we would try to avoid. There are risks that we consider worth taking and those that we would not consider because they are surely headed for a loss.
The worlds of business and finance are not much different from our lives when it comes to risk-taking. In any business venture, owners or shareholders are bound to face risks.
Like the risks we face in everyday life, some of these business risks can be easily handled and some cannot, and the process of deciding which risk belongs to the practice of risk management services.
Risk management refers to the entire process of identifying, analyzing, evaluating, and treating risks. But since businesses are faced with many different types of risks, risk management specializations have also been created to deal with them. One specialization of risk management is enterprise risk management, which deals with non-financial risks.
And then there's financial risk management, which is very similar to general risk management with a specialization in a business's finances. Like general risk management, financial risk management also follows the processes of risk identification, analysis, evaluation, and treatment. Financial risk management, however, is more focused on finances and makes use of financial instruments to manage a business's exposure to risks.