MITIGATING BUSINESS RISKS

MITIGATING BUSINESS RISKS

The system of mitigating business risk can be distilled into four, namely: Avoidance, Acceptance, Limitation and Transference.

RISK TRANSFERENCE
This involves the transfer of risk to a willing third party e.g. an insurance company or even outsourcing a non-core business to a third party

RISK LIMITATION
This is the most common risk management strategy used by businesses. The strategy limits a company’s exposure to risk.

RISK ACCEPTANCE
This does not reduce any risk, but however it is still considered a strategy. This strategy is effective when the cost of other risk management options such as avoidance and limitation out weight the cost of the risk itself. A company may be unwilling to spend a lot of money on risks which has very low probability of occurring.

RISK AVOIDANCE
It is an act that avoids any exposures to risks.

On the surface this appears prudent but on the long run it is the most expensive of all the risk mitigation tactics because any business that fails to take risks will be limited.