Explain in detail how a risk manager can make optimal use of insurance Essay

Explain in detail how a risk manager can make optimal use of insurance as part of an overall risk management strategy - Essay Example A considerable number of companies have lost equipment, buildings, and materials to natural disasters. In addition, many companies have lost human resources, as well as revenues as they could no longer manufacture goods and services. The four leading strategies for risk management include risk financing, loss reduction, loss prevention, and risk avoidance (Iverson 2013, p. 2). Even though some businesses can assume, reduce, or even avoid certain risks, few business organizations can fully protect themselves without purchasing insurance. Overall, a risk manager can effectively make use of insurance as part of a general risk management strategy to ensure sustainability and profitability of the business. Most companies greatly benefit from taking their risks into consideration when they are performing extremely well, as well as when markets are rapidly growing. Accordingly, the companies can sustain growth and profitability (Andersen 2010, p. 1). A risk manager plays a vital role in predicting and enacting measures that would help prevent or control losses within the company. The process of risk management involves identifying various exposures to potential losses, measuring the exposures, and making an informed decision about the most suitable approach to protect the company from losses or harm, considering the nature of the risks and the goals and resources of the company (Andersen 2010, p. 1). Some risks are more important than others. Therefore, the risk manager must determine the importance as well as ability of each risk while identifying and evaluating exposures. The goals and resources of a company are vital to selecting the best method for preventing or controlling risks. However, the risk manager must monitor the method already selected and implemented to ensure that it generates or produce the projected outcomes. In general, company risks fall under five broad categories