What is Risk treatment?
Risk treatment is the name given to a wide range of strategies which are used to reduce, remove, avoid, transfer or otherwise alter the risk. Specific treatment strategies can be created to treat specific risks which have been identified. Treatment strategies may differ, depending on the risk context.
What is Risk treatment like?
A risk treatment is like a medical treatment. If you are sick and you go to the hospital, the doctors will take measures to cure the illness. If it is not possible to cure the illness altogether then the doctors will take steps to reduce the effects that that illness will have on your health. Risk treatment works in the same way, in so far as that they attempt to maintain the health of a business or organisation by providing a solution to a problem.
What is the purpose of Risk treatment?
The purpose of risk treatment is to reduce, remove or transfer risk. It is often better for a company to plan ahead and prevent a risk from occurring than it is for them to take the chance and face that risk. Planning ahead can help to save a company a lot of time and money because some risks may prove to be very damaging to a business.
What are the different types of Risk treatment?
There are two main types of risk treatment strategies: Avoidance and Minimization.
Avoidance Strategies – These strategies seek to completely prevent a potential risk from occurring or impacting on a company at all. Major sub-divisions of the avoidance strategies category include transfer, elusion and diversification.
Minimization Strategies – These strategies seek to minimise the impact of a risk on a product or organisation, so that as little as possible damage is done. Minimization strategies are usually used when avoidance strategies are not possible, or have already failed.
What’s involved with selecting a Risk treatment?
Selecting the appropriate risk treatment strategy can depend upon the risks which have been identified and how they have been classified as part of the risk evaluation procedure. If a risk has been described as being low cost (ie if it happened, it would not have a huge impact) and low probability (it is unlikely to happen), then the risk may be classified as acceptable, and the treatment would involve no action. If the risk was high-cost, high-probability then a strong avoidance policy would be put in place. A back-up minimization strategy (or contingency plan) may also be created to prevent the risk from causing a high –degree of damage. It may be easiest to plot all of the risks onto a risk matrix, to see which risks it is most necessary to create a treatment action plan for, and which risks it is least important to treat.
Where does Risk treatment fit into the risk management process?
Risk treatment fits into the controlling area of the risk management process. Treatment attempts to control the risks by removing them or minimizing them.
How does Risk treatment impact on managing organisational risk?
Without effective risk treatment strategies in place, some of the identified risks could spiral out of control. Attempting to manage organisational risks without any form of risk treatment strategy may be worthless.
What terms are used in Risk treatment?
Risk – a problem or opportunity which may or may not occur
Treatment – the action which will be taken to reduce or remove the risk
Diversification – Creating different options to prevent risk
Transfer – Giving the risk to someone else, for example an insurance broker.
Where can I find more information about Risk treatment?
selected by Industry Professor Association members for skillmaker.edu.au
by Peter Baskerville Google+