What is the main purpose of risk management?

The main purpose of risk management is to control threats to capital and earnings. This involves identifying, assessing, and mitigating risks that could potentially harm the financial stability or profitability of an organization. Effective risk management helps organizations anticipate potential challenges and implement strategies to minimize their impact. By managing risks related to investments, operational processes, compliance, and strategic initiatives, businesses can protect their assets and ensure sustainable growth.

In contrast, while enhancing employee productivity, managing marketing strategies, and improving customer satisfaction are important aspects of running a business, they do not capture the essence of risk management. Risk management specifically focuses on protecting an organization from uncertainties that could negatively affect its financial health and overall success. Therefore, recognizing and addressing risks is fundamental to maintaining and improving an organization's capital and earnings.