What is meant by "effective risk management"?

Effective risk management refers to a systematic approach to identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unforeseen events. This involves making informed decisions based on a thorough understanding of risks and their potential consequences, which perfectly aligns with the definition provided in the chosen answer.

By taking a systematic approach, organizations can ensure that they not only address risks but also leverage opportunities that may arise. Effective risk management emphasizes the importance of data-driven decision-making, providing a structured framework to assess risks in context and prioritize actions based on their potential impact on the organization’s objectives.

Other choices, while related to aspects of risk management, do not capture its essence as fully. Eliminating all risks is not practical or possible; risks are inherent in all activities. Ensuring maximum asset protection is a goal within risk management, but it doesn't encompass the broader systematic approach. Assessing employee performance, while important in an organizational context, does not pertain to risk management itself. Thus, the choice that best reflects the comprehensive nature of effective risk management is the one that emphasizes informed decision-making.