Transcript Methods for Dealing with Risks

Emily, Arron, Stephen and Ben
Dealing with Risk
Avoid
Reduce
Transfer
Keep
http://www.ioshroutefinder.co.uk/PDF/Dealing%20with%20risk.pdf
Evaluating Risk
Evaluating Risk
Avoid the Risk
Avoiding Risk
Example would be not climbing or working on access
network when lightning is in locality
Deciding not to travel if weather conditions are too adverse
Reduce
Reducing is one method of
dealing with risks.
Risk reduction or
"optimisation" involves
reducing the severity of the
loss or the likelihood of the
loss from occurring.
Reducing
The
Risk
There are various ways in which risks can be reduced.
The best way to minimise risks is to carry out
comprehensive research of the subject, for example
economic, consumer and product research.
Also –
 Risks can be reduced by careful screening of customers
and by providing a proper training and development
programme
Example of Risk Reduction
Outsourcing could be an example of risk reduction if the
outsourcer can demonstrate higher capability at managing
or reducing risks.
Foe example, a company may outsource a large company
issue such as its software development needs to another
company, while handling the business management itself.
This way, the company can concentrate more on business
development without having to worry as much about the
manufacturing managing the development team.
Therefore reducing the risk of mistakes being made.
TRANSFER THE RISK
Shifting the responsibility or burden for disaster loss to
another party through legislation, contract, insurance or
other means

INSURANCE IS THE MAIN WAY OF TRANSFERING
RISK

CONTRACTING IS ANOTHER WAY OF
TRANSFERRING RISK
RISK TRANSFER INSURANCE
• Many companies will have different types of insurance
to protect from risk
• Traditional insurance products covering natural hazards
are written on what is often termed an “indemnity”
basis, where the policyholder insures a defined property,
economic activity or other entity, such as a building or a
business, against specific hazards such as earthquake,
wind or flood. In the event of the insured item being
lost or damaged as a result of a covered hazard, the
policyholder is compensated for their financial loss.
Therefore, insurers pay claims based on actual losses.
RISK
TRANSFER
INSURANCE
Types of Insurance:
 Vehicle Insurance
 Property Insurance
 Health Insurance
 Life Insurance
 Public Liability
Insurance
 Crop Insurance
• Environmental
Insurance
• Marine Insurance
• Aviation Insurance
• Livestock Insurance
Keeping Risk
 The last approach is to accept the risk, which means the company understands the level
of risk and the potential cost of damage, and decides to just live with it without
implementing any countermeasures. Many companies will accept risk when the
cost/benefit ratio indicates that the cost of the countermeasure outweighs the potential
loss value.
 Here we compare the differing approaches of two car manufacturers:
 “Toyota has announced the recall of vehicles in the US, Europe and China over
concerns about accelerator pedals getting stuck on floor mats.
 The firm has announced plans to recall 1.1 million more cars in the US a day after saying it
was suspending sales of eight popular US models.” (BBC news)

 Peugeot 406 “Using the remote to lock the car does not always lock the boot, leaving
items inside vulnerable to theft (per BBC Watchdog 10-9-2002). Speedometer failure of
2.1TD is common” (honestjohn.co.uk)

 Both companies have looked at the defect, evaluated the risk and weighed up losses due
to compensation/legal action VS cost of recall and amendment. Peugeot has decided
that accepting the risk allows them to protect their profits.