Every business accepts the possibility of losing money in order to make money. Risk Management is the process of reducing the threat of loss due to uncontrollable events. To consider the probability that an event will occur. To avoid the possibility of a suit , for example, not to produce any products -which would ,of course, eliminate both the threat of a lawsuit and the opportunity to profit. With rare exceptions, avoiding risk entirely is extreamly difficult.
Risk reduction is an important element in most companies' approach to risk management.
Typical precautions include putting safety locks on doors to prevent robberies, installing overhead sprinklers to minimize fire damage, and periodic checking motor vehicles to prevent accidents. Setting aside money on regular basis could be cheaper than purchasing insurance. Moreover, the company can earn interest on the reserved cash. Such assumption of risk is also called self-insurance or risk retention. In buying insurance, companies transfer the risk of loss to an insurance firm, which agrees to pay for certain types of losses.