Risk Management

Risk management is a process carried out within business which aims to identify, evaluate and take the most appropriate action in regards to a risk.

Risks can generally be handled by one of four strategies. A risk can be avoided, reduced, transferred or accepted.

A risk can be avoided if an action is taken that prevents a consequence arising from a risk. An example of risk avoidance may be holding meetings remotely to avoid the risk of exposing the participants to Coronavirus.

Reduction can be used where a risk can not be entirely avoided but can be managed to minimise its impact. An example of risk reduction may be to maintain a supply of spare parts for critical infrastructure in order than the duration of any break down can be minimised.

Transferring risk can be used where a third party will accept the risk on a company’s behalf. A typical example of risk transfer is through the purchase of an insurance policy against a particular risk.

Risk acceptance does not attempt to take action against the risk and accepts the consequences. This type of strategy may be used where there is a risk of a fine for operating a construction site during weekends; if the project is running behind the fine may be smaller than the penalty for late delivery making the risk acceptable.