Risk Management is the practice of continuously assessing and controlling all known exposures and hedging risks to a sustainable level or maximizing profitable returns wherever applicable. It is a vast area that covers all aspects of a firm's activities and is perceived as an attempt to manage a firm's risk level using various derivative instruments. Risk management, although essential to control risk and avoid losses, cannot guarantee complete success. The selection of suitable methods for risk management depends on a firm's expectations regarding the future, as well as the degree of risk, acceptable to the management. In short, the aim of risk management is to maintain risk at a desired level at minimum cost.

For most people in rich countries, life has become much safer in a number of important ways. Over the past century, their life expectancy has risen by around two-thirds. Workplaces, the wider environment and many diseases have become less hazardous. Wars in the rich world have become less likely. While life has become more risky, risks have not been eliminated. True, some risks have become smaller. But others have shifted to different people, and new ones have sprung up to take their place. Earlier, companies used to concentrate on the more easily spotted risks, such as financial ones. Now, after having learned to use sophisticated tools to manage financial risks, they are facing a whole array of new hazards.

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