Risk management, in the context of insurance, is a process in which an analyst goes over data and decides whether or not providing insurance to a potential policyholder is a wise investment or not. Without having a strict handle on this process, a company can end up incurring serious losses. Risk management involves determining the possible risk, investment, and earnings based on data provided by potential clients through the application process.
To make it less complicated, risk management is a simple process. First, the analyst decides what the risks are. Once they have figured that out, the next step is to decide what they are going to do with the potential policyholder. They adjust the amount of coverage based on the risk managment assessment, or simply do not accept the applicant. Risk management exists in all parts of the financial business world, not just insurance.
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