I changed my major from Accounting to Risk Management becaus someone told me I should due to my personality not fitting Accounting. The only problem is I do not really know what Risk Management is. My family friend is a Risk Manager and she works for an insurance company… So can someone explain the whole idea to me?

Each business entity is exposed to potential losses from insurable risks. For example, a restaurant can have the building burn down due to fire, employees can get injured on the job and patrons can slip and fall on the premises. All of these events happen often.

A risk manager attempts to find ways of either transferring the risk from these potential losses to another entity (i.e., purchase insurance) or mitigating risks of losses by implementing loss control efforts.

Usually, the risk manager does both of these. At the same time, the risk manager is attempting to find the most cost-effective way of accomplishing it.

For example, the risk manager may decide that it makes the most sense to purchase workers compensation insurance, retain all of the risk of loss from slips & falls, and only retain the first $25,000 of losses from fire damage to the property.