What are the essential steps to manage risk effectively?

The essential steps to manage risk effectively encompass a comprehensive approach that ensures all aspects of risk management are addressed. The correct answer identifies a series of critical actions: identifying potential risks, assessing their impact and likelihood, evaluating them in the context of the business's risk tolerance, actively managing the identified risks through strategies to mitigate or transfer them, and reporting on the risk status and management efforts.

This structured approach allows organizations to fully understand the landscape of risks they face, make informed decisions about prioritization and response, and maintain a clear line of communication about risk management efforts both internally and externally. Each of these components provides a layer of diligence that is necessary for an effective risk management strategy, ensuring that risks are not only acknowledged but actively managed and reported on, creating a proactive risk-aware culture within the organization.

The other options do not encompass the full spectrum of steps that are needed for robust risk management. For instance, ignoring risk or only evaluating and managing without proper identification and reporting would significantly reduce the effectiveness of a risk management program. Thus, the correct sequence of steps is indispensable for an organization hoping to navigate its risk landscape successfully.