Types of Risk Management

Risk Management

Almost overnight, risk management careers have become one of the most important jobs in the world, and that’s not an understatement or a euphemism on my part.

The reason? The global pandemic which has caused an immense job growth.

Because of the unfortunate events that the entire planet has gone through in the past few months, we have noticed one thing.

Companies around the world have rushed to create risk committees and pushed job growth.

When a company dives into Enterprise Risk Management, it wants to know about three types of risks:

1. Regulatory risks
2. Financial risks
3. Operational risks

These categories can mean anything and they depend on the type of company since ERM means they have to reach company-wide.

For example, ERM poses questions such as: what happens if one of our warehouses floods, what happens if our new type of chocolate doesn’t receive approval, or, like in this very real situation we have seen in the past few months – what happens if we have to send tens to hundreds of employees on leave all at once?

The risk manager has to calculate the potential financial impact any one of these situations might have on the enterprise.

This also includes cybersecurity, which is a rather new branch of ERM, but a very important one nonetheless. Which brings us to this.

Once you delve into the world of risk management to learn as much as you can to jumpstart your risk management career, you will see that classifying risk management is not so easy.

The giants of the financial world have deconstructed risk management and then put it back together in more ways than I care to count.

Still, here are the nine major types of risk management we can talk about.

1. Strategic

A company resolves to this type of risk management when its place on the market is being threatened by a competitor.

As a result, the company in question needs to reduce the impact the competitor is making.

2. Compliance

It refers to new laws and regulations that might change the way a company operates. As a result, a risk manager is brought in to resolve the new issue.

3. Financial

Financial risk management has to do with accounts, insurance, assets, mergers, and everything in between.

A coveted but very difficult position, business management is one of the most known and sought after jobs when it comes to risk management careers. You can choose between FRM and CFA for this career.

4. Operational

This type of risk management oversees any business operations problems such as machinery breaking down, power cuts, loss of employees, or primary materials to work with.

5. Environmental

As the name suggests, it’s the type of risk management that deals with natural disaster scenarios, as well as making sure your business is environmentally friendly.

6. Employee

Working with people is not easy, everyone knows that.

Of course, you already have the human resources department, but a company, especially a large one, also needs employee risk managers in case something unforeseen happens.

This includes stolen assets, fraud, and violent behavior.

7. Political

This type of risk management is not common, but it exists. For example, there are companies situated right on the border between two states that need to handle their situation extremely carefully, using a zip code and an email address.

8. Society

In recent years, societal risk management has become of the most important branches of the trade.

Therefore, if you are considering any risk management careers in business, why not look into this one?

There have been so many changes to our global society which include equal rights for the LGBTQ community, for women, for black people, as well as the free trade movement, veganism, legalization of some substances in the US, and so much more.

The job risk manager society wise is now a large branch that deals with all of this.

9. Cybersecurity

This is yet another branch of risk management that has taken flight in the past few years.

Extremely important and alarming issues such as stolen personal data off social media websites and the release of deep fake technology at large have made cybersecurity risk management more important than ever before.

Although not classified exactly as a traditional type of risk management, we can also talk about the benefits of a few other non-official categories:

• real estate risk management/insurance industry
• hedge fund risk management for business units

When talking about types and categories, these are just the basics or fundamentals of risk management.

Risk Management Careers – FAQs

Risk management is a very broad subject and yet I won’t deny that most of the people who approach me about it always seem to come round to the same few questions. So here they are.

Is risk management a good job?

Do you like apples? Of course, this is a very subjective thing to ask. However, I think the answer is in this very article if you’ve read it carefully since the beginning.

At the current moment, a risk management career is a fantastic way to go seeing the general state of unrest we find ourselves globally.

Companies have rushed to hire risk managers left and right to fix the insurance problems that have arisen out of nowhere.

Predictions also say that everything that has happened functioned as a bit of a lesson.

In the sense that companies will continue to hire risk managers should something like this ever happen again?

Do risk managers make good money?

Yes, risk managers are considered to make a fairly good salary as long as they have the right degrees. Reports show that, on average, a risk manager in the US makes approximately $117, 000 per year.

Apart from that, you will also receive bonuses and packages such as a flexible spending account, health, dental, and vision insurance, as well as relocation assistance if you need it as compensation or pay.

What is project risk management?

All risk management activities that can be attached to project management. This definition can be used in the world of finance but also in any other line of work where project management is involved.

What is credit risk management?

In the field of banking, credit risk management is seen as identifying, analyzing, and measuring risk levels when it comes to credit activities.

The idea is to eliminate all risks related to the credit process.

A final word for you

As we’ve seen, risk management careers are on the rise as we speak and the job growth is huge.

Not just because of the sad situation the world has had to face, but also because what we went through has taught us all a valuable lesson.

Risk comes in all shapes and sizes, companies can lose money, assets, and employees overnight for reasons you might have not even thought about a mere few months ago.

As a result, it is the risk manager’s job to keep the ship floating. Good luck!

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