West Visayas State University24THM 202MQL5.comstudy.com
There are two primary concepts of risks control: exposure or riskavoidance and loss reduction.Exposure avoidanceis a risk control technique that avoids anyexposure to that particular risk.It is about eliminating any risk exposurethat represents a potential loss. It includes any mitigation strategies usedto avoid risk exposure. Risk avoidance is not carrying out any activity thatmay bring risk. It is simply avoiding the activity that leads to a loss. It isthe approach of not engaging in an activity that gives rise to risk. Riskavoidance becomes an option when the extent of the risk of a business isknown.Risk avoidance and mitigation can be achieved through theimplementation of policies and procedures, training and education, andtechnology. Examples are the elimination of particularly dangerousactivities or services, the avoidance of certain areas due to environmentalthreats, or the change of a tourist destination dueto political unrest.Lossreductionrefers to measures that reducethe severity of a loss after it occurs.It acceptsthe risk of a specific activity or service but triesto minimize the loss rather of eliminating it. Themanagement chooses to continue offering theactivity, but will take steps to mitigate theseverity of the possible damage.An example of this is requiring all ski lesson participants to wearhelmets. There is still the risk of falling, but actions are taken to reducethe severity of any fall. Another example is the installation of sprinklers inits buildings to reduce the risk of a fire destroying the building altogetherby spreading from room to room.Risk TreatmentsThe next step in the process is risktreatment, failing the ability to control all risksidentified. That includes the concept of risktransfer and risk-retention.Risk transferrefers to a techniquethrough which risk is transferred to a thirdparty. The risk may be transferred by contracteither by entering into a service contract or byrequiring a waiver from the participants. Inother words, risk transferinvolves one party taking the liabilities of anotherparty.West Visayas State University25THM 202marketing91.comcanstockphoto.com
Buying insurance is a common example of risk being transferredfrom an individual or entity to an insurance company. Risk is transferredthrough insurance by paying the premium, in which the financial risk of anaccident is absorbed. In general, the individual or entity shall provideperiodic payments to the third party.When an individual or entity purchases insurance, they insureagainst financial risks. An individual who purchases car insurance, forexample, acquires financial protection against physical damage or bodilyharm that can result from trafficincidents. As such, the individualshifts the risk of large financiallosses arising from a traffic incidentto an insurance company.Theinsurance company will typicallyrequire periodic payments from the
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