Section 9.87 Risk Management Strategies Flashcards
Objective 5.2: Explain elements of the risk management process
Four primary risk management strategies
1 Risk Transference (Risk Sharing)
Shifts risk to another party
● Common methods:
○ Insurance
○ Contract indemnity clauses: A contractual agreement where one party agrees to cover the other’s harm, liability, or loss stemming from the contract
Doesn’t remove the risk:
○ Shifts the responsibility for handling the risk’s financial consequences
Four primary risk management strategies
2 Risk Acceptance
Acknowledge and deal with risk if it occurs
● Used when cost of managing the risk outweighs potential loss or risk is unlikely to have a significant impact
● No actions to mitigate the risk are taken
Risk Acceptance Methods 1/2
1 Exemption
Provisions that grants an exception from a specfic rule or requirement
e.g In the context of financial organisations:
■ The organization doesn’t have to obey a specific rule or requirement
■ There is no risk of not complying with the rule or requirement
■ There may be a benefit or mitigation offered by the rule or requirement which exempted organisations won’t receive because they are exempt
Risk Acceptance Methods 2/2
2 Exception
Provions that permits a party to bypass a rule or requirment in certain situations or conditions
e.g A business may be able top process peronsal data without consent in certain conditions
● In both Exemption and Exception, the organisation assumes risk either by operating without the safeguards or mitigations offered by a rule (exemption), or by operating in a way that lets them evade the risk (exception).
Four primary risk management strategies
3 Risk Avoidance
● Change plans or strategies to eliminate a specific risk
● Chosen when the risk is too great to accept or transfer
Four primary risk management strategies
4 Risk Mitigation
● Take steps to reduce likelihood or impact of risk
● Common strategy involving various actions
