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What is Risk Management Effectiveness?

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Risk Management Effectiveness is the percentage of loss events that were managed as risks before they occurred. It is a basic metric that measures the coverage of risk identification and management.
Evaluating risk management by total losses doesn't always make sense. A highly profitable business unit may choose to accept a wide variety of risks, resulting in regular loss events. As such, loss events aren't necessarily a sign that risk management is suboptimal.
The goal of risk management is often to identify risks and ensure they are treated. When this is the goal, Risk Management Effectiveness is a good measure of your risk management program or activities.
Overview: Risk Management Effectiveness
Risk Metrics
The percentage of loss events that were managed as risks before they occurred.
Indicates that risks are being managed. In other words, losses that occur were accepted as risks by business units or were unavoidable residual risks.
A project has 80 issues and problems over the course of its delivery. Of these, 60 were identified as risks by project risk management but were accepted by the business in order to expedite the schedule and reduce costs. The risk management effectiveness rate for the project is:
(60/80) * 100 = 75%
Related Concepts


This is the complete list of articles we have written about risks.
AI Risk
Risk Avoidance
Brand Risk
Budget Risk
Business Risks
Change Risk
Compliance Risk
Concentration Risk
Cost Risk
Country Risk
Credit Risk
Demand Risk
Dread Risk
Economic Risk
Exchange Rates
Existential Risk
External Risk
Financial Risk
Force Majeure
Good Risk
Human Error
Risk Identification
Infinite Risk
Inflation Risk
Inherent Risk
Interest Rates
Internal Risks
Investing Risk
Legal Risk
Liquidity Risk
Model Risk
Moment Of Risk
Natural Disasters
Negative Risk
Operations Risk
Passive Risk
Personal Risk
Political Risk
Process Risk
Procurement Risk
Product Risk
Project Risk
Pure Risk
Quality Risk
Recession Risk
Risk Mitigation
Refinancing Risk
Regulatory Risk
Reputational Risk
Residual Risk
Resource Risk
Revenue Risk
Risk Appetite
Risk Aversion
Risk Examples
Risk Management
Risk Management Process
Risk Matrix
Risk Meaning
Risk Measurement
Risk Taking
Risk Tolerance
Risk Triggers
Risk vs Issue
Risk vs Opportunity
Risk vs Uncertainty
Risk-Reward Ratio
Seasonal Risk
Secondary Risk
Security Risk
Settlement Risk
Risk Sharing
Speculative Risk
Strategic Risk
Strategy Risk
Supply Risk
Systemic Risk
Tactical Risk
Taxation Risk
Technology Risk
Risk Transfer
Unforced Error
Upside Risk
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Business Risks

A list of common business risks.

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