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 | Treatment Options |
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The options for treating risk include risk avoidance, risk reduction, risk sharing and risk retention or acceptance.
Risk avoidance
Risk avoidance is sometimes adopted when an activity or situation involves a high level of risk which cannot be adequately managed to an acceptable level. The risk is deemed to be too high against the potential benefits associated with the activity. A decision is made not to become involved in, or to withdraw from a risk activity or risk situation.
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Risk reduction
Risk reduction is one of the most common options in treating risk. A decision is made to develop and implement risk treatment strategies to lessen the likelihood of a risk event occurring and or, reduce the negative consequences associated with a risk, should it be realised.
Risk sharing
Also a common option, risk sharing or risk transfer involves a decision to distribute the potential for loss (and potential for gain) to another party.
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The most common forms of risk sharing include sub-contracting, outsourcing and insurance. It is important to note that some risks cannot be transferred in their entirety, such as an organisations duty of care. In addition, transferring risk can result in the nature of the risk changing and or the creation of new risks.
Risk retention
Risk retention is where a decision is made to accept the potential for loss, as balanced with the potential benefits, without attempting to reduce the level of risk involved.
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