Risk response methods, the four basic methods of risk response

What are the four measures to deal with risks.

There are four basic approaches to risk response: risk avoidance, risk taking, risk reduction, and risk sharing.

Risk control. It refers to the various measures and methods taken by the risk manager to eliminate or reduce the various possibilities of the occurrence of risk events, or the risk controller to reduce the losses caused by the occurrence of risk events.

As a manager, we will take various measures to reduce the possibility of risk events, or control the possible losses within a certain range, so as to avoid unbearable losses caused by the occurrence of risk events.

There are four basic methods of risk response: 1. Loss control: making plans and taking measures to reduce the possibility of losses or reduce actual losses; 2. Risk transfer:

refers to the act of transferring the risk of the transferor to the transferee through a contract; 3. Risk avoidance: It is to consciously give up risks and completely avoid losses, which is the most negative way to deal with risks; 4. Risk retention: bear the risk loss with your own property.

Risk factor: refers to the cause or condition that prompts the occurrence of a specific risk event or increases the probability of its occurrence or expands the degree of loss. It is the potential cause of the occurrence of a risk accident and is an intrinsic or indirect cause of the loss.

Depending on their nature, risk factors can be divided into two types: tangible risk factors and intangible risk factors.

1. Tangible risk factors: refer to the factors that a certain subject itself has that are sufficient to cause the occurrence of risk accidents or increase the chance of loss or aggravate the degree of loss.

2. Intangible risk factors: are risk factors related to people's psychology or behavior, usually including moral risk factors and psychological risk factors.

Risk response strategies include: risk taking, risk aversion, risk transfer, risk conversion, risk hedging, risk compensation, and risk control.

1. Risk taking, also known as risk retention and risk retention, refers to the acceptance of the risks faced by the enterprise, so as to bear the consequences of the risk.

2. Risk aversion refers to the avoidance, cessation or withdrawal of business activities or business environments that contain a certain risk to avoid becoming the owner of the risk.

3. Risk transfer refers to the transfer of risks to a third party by the enterprise through a contract, and the enterprise no longer has ownership of the transferred risks.

4. Risk conversion refers to the transformation of the risk faced by the enterprise into another risk through strategic adjustment and other means.

5. Risk hedging refers to the adoption of various means to introduce multiple risk factors or assume multiple risks, so that these risks can be hedged against each other, that is, the impact of these risks can be offset by each other.

6. Risk compensation refers to the enterprise taking appropriate measures to compensate for the losses that may be caused by the risk.

7. Risk control refers to the control of the motives, environment, conditions, etc. of the occurrence of risk events to achieve the purpose of reducing the loss of risk events or reducing the probability of risk events.

Ways to reduce risk

Strengthen team support and avoid separate key project structures. Some technical risks can be effectively avoided by enhancing project support between teams through effective team building. Increase the authority of the project manager.

Some issues can be resolved at the level of the project manager without reporting to a higher level, which can effectively shorten the time to resolve risks.

Once the associated risks have been assessed, management determines how to respond. Coping includes risk avoidance, reduction, sharing, and acceptance. In considering the response, management assesses the likelihood and impact of the risk, as well as the cost-effectiveness, and selects the response that keeps the remaining risk within the desired risk tolerance.

Management identifies all possible opportunities and perceives risks from the perspective of the scope or portfolio of entities to determine whether the overall residual risk is within the risk capacity of the entity.

There are four types of measures to deal with risk – risk avoidance, risk acceptance, risk reduction and risk sharing, which will be analyzed in detail below with examples.

1. Avoid risks. Eliminate risk by avoiding exposure to events that may occur in the future. Ways to avoid risks are:

Through corporate policies, restrictive systems and standards, we prevent the occurrence of high-risk business activities, trading behaviors, financial losses and asset risks. By redefining objectives, adjusting strategies and policies, or reallocating resources, certain special business activities are stopped. When determining business development and market expansion goals, avoid chasing "off-strategy" opportunities.

Review investment options and avoid actions that lead to low returns, deviations from strategy, and unacceptably high risks. Hedge risk by exiting an existing market or region, or by liquidating, liquidating, or divesting a portfolio or business.

2. Accept the risk. Maintain the current level of risk. Here's how:

Take no action to keep the risk at the current level. Repricing products and services based on factors such as market conditions permitting to compensate for the cost of risk. Offset risk with a combination of tools that are properly designed.

3. Reduce risk. Use policies or measures to reduce risk to an acceptable level. The methods are:

Disperse financial, physical, or information assets in different locations to reduce the risk of catastrophic losses. Reduce the likelihood of adverse events to an acceptable level with the help of internal processes or actions to control risk.

Respond to contingencies by supporting the plan and empowering the right people to make decisions. If necessary, the plan can be checked on a regular basis, and the execution can be carried out as the inspection is carried out.

4. Share risks. Transfer risk to an independent, well-funded institution. For example:

Insurance. Guided by a clear risk strategy, an insurance contract is entered into with a well-funded, independent institution. Reinsurance.

If necessary, contracts can be signed with other insurance companies to reduce investment risks. Transfer of risk. Invest in new markets or products through alliances or joint ventures to reap returns.

Compensate for risk. Compensate for risk by entering into risk-sharing contracts with well-funded, independent institutions.

Risk response refers to the corresponding countermeasures taken in response to project risks.

Commonly used risk countermeasures include risk avoidance, mitigation, retention, transfer and their combinations. against uncontrollable winds.

Insurance: Buying insurance from an insurance company is a measure of risk transfer.

What are the four measures to deal with risks.

1. Risk aversion: Risk aversion refers to the loss caused by the later stage by suspending the business;

2. Risk reduction: Risk reduction refers to reducing the factors that cause risk to achieve risk control;

3. Risk transfer: Risk transfer refers to the transfer of part of the risk borne by the subject after a third party is added to help bear a part of the risk;

4. Risk acceptance: Risk acceptance refers to not taking measures against risks if you think that the impact of risks is not large.

1. Risk aversion: Risk aversion refers to the loss caused by the later stage by suspending the business;

2. Risk reduction: risk reduction refers to reducing the factors that cause risk to achieve risk control;

3. Risk transfer: Risk transfer refers to the transfer of part of the risk borne by the subject after a third party is added to help bear a part of the risk;

4. Risk acceptance source: Risk acceptance refers to the fact that if the hail state believes that the risk impact is not large, no measures can be taken for the risk.