What is a primary goal of risk management?

The primary goal of risk management is to reduce the potential for loss. This involves identifying, assessing, and prioritizing risks, followed by the application of resources to minimize the impact of these risks on an organization or an individual. Effective risk management ensures that potential threats are addressed proactively, thereby safeguarding assets and ensuring the continuity of operations.

By focusing on loss reduction, businesses can maintain stability and improve their overall resilience to unforeseen events. Risk management strategies may include implementing safety protocols, diversifying investments, or purchasing appropriate insurance coverage, all aimed at mitigating the likelihood and severity of adverse outcomes.

In contrast, maximizing litigation costs or minimizing regulatory compliance does not align with the objectives of risk management. Litigation costs often stem from unresolved risks, while regulatory compliance is essential for maintaining operational legality and integrity. Additionally, eliminating all insurance needs is impractical, as insurance is a tool that helps manage risk rather than a target for elimination.