What does risk management primarily involve?

Risk management primarily involves identifying and prioritizing risks because it focuses on systematically assessing potential threats that could impact an organization’s objectives. This process begins with recognizing various risks—such as financial, operational, strategic, and compliance risks—then evaluating the likelihood and potential impact of these risks. By prioritizing them, businesses can allocate resources effectively and develop mitigation strategies for the most significant risks, ensuring that they protect their assets and maintain operational continuity.

This approach is essential for informed decision-making and helps organizations plan for uncertainties, ultimately supporting the achievement of their goals. In contrast, the other options refer to specific activities that do not encompass the broader scope of risk management. For instance, investing in financial markets pertains to financial strategies rather than risk assessment processes, while reducing all business activities is too limiting and does not directly relate to managing risks. Minimizing employee turnover, while important, addresses a narrower concern related to human resources rather than the expansive field of risk management.