In today's unstable global financial environment, good risk management is not a luxury but an essential necessity for the survival and viability of financial institutions. Banks and other financial institutions are confronted with a broad spectrum of risks such as credit risk, market risk, operational inefficiencies, regulatory risks, cyber risks, and liquidity risks. The development of these risks prompted by globalization, technological upheaval, and the growing sophistication of financial instruments has pushed institutions to develop more sophisticated, integrated, and forward-looking risk management systems. This research paper seeks to present an in-depth analysis of risk management practices used by financial institutions, comparing conventional methods and new innovations like AI-based predictive analytics, blockchain, and real-time monitoring systems. Based on international case studies, empirical evidence, and regulatory perspectives, the paper determines the most effective practices being used today, analyzes their performance in actual situations, and examines the influence of international regulatory standards like Basel I, II, and III. In addition, the paper points out the shortcomings of existing literature, particularly regarding the incorporation of risk types into enterprise-wide risk management systems and the use of technology in mitigating risks in developing economies. Based on qualitative and quantitative methods such as financial analysis, stress testing, and expert interviews the study arrives at practical recommendations for enhancing the resilience, transparency, and sustainability of financial institutions in a world that is growing more uncertain by the day.