Risk Response Planning

Risk response strategies, also known as risk treatment options, are developed after taking into consideration a number of factors including the risk ranking, risk tolerance thresholds, implementation costs, resource constraints, and the degree to which the risk response strategies are expected to reduce the impact and/or probability of risk events. Risk owners with the right level of authority, access to resources and clearly defined responsibilities have to be formally assigned for each identified risk. It is also important to keep risk management experts actively involved in the process and leverage knowledge of people in the organization who are most familiar with the identified risks. The systems thinking approach should be applied to the development of risk response strategies because overly simplistic solutions are often inadequate for challenges confronting complex adaptive systems. There is no universally accepted categorization of risk response strategies but risk control and risk financing are two commonly used general categories. Risk control refers to the range of risk response strategies and techniques designed to eliminate loss exposure, reduce the likelihood of a risk event, minimize the extent of potential losses, segregate loss exposures, or reduce loss exposure by contractually shifting legal responsibility for a loss. Risk financing involves allocating funds to pay for losses or shifting the financial responsibility for a loss to a third party. Most organizations will use a combination of risk control and risk financing strategies to address significant loss exposures. Another common categorization of risk response strategies includes avoidance, mitigation, transfer, and acceptance of the identified risks.

 

Basic Risk Response Strategies