Which term describes the function of risk management in finance?

The term that describes the function of risk management in finance is minimizing potential losses. Risk management is fundamentally about identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. This includes strategies and measures to protect assets and earnings from potential risks, thereby ensuring that the organization can operate efficiently and meet its objectives.

While maximizing investment returns and enhancing customer relations are important aspects within finance and business in general, they are not the primary focus of risk management. Streamlining transaction processes focuses on improving efficiency and reducing costs associated with completing financial transactions, which is more operational than risk-related. Thus, the core essence of risk management lies in its proactive approach to reducing potential losses, making it central to the financial decision-making process.