Dimayuga, Niña Keith V.

03/16/23

BFN 4303 – RISK MANAGEMENT 20220138476

A. 7 Types of Risk Treatment

1. Risk Transfer – it is a common method of the shifting risk from the one
party to one another. Also, it involves a non-insurance contract or agreement
between the two parties, whereby one agrees to hold another party harmless
for specified actions, inactions, injuries, or damages and indemnify the
owner. Risk reduction is one of the four main risk management techniques to
be used in conjunction with other techniques to help an individual or
organization effectively manage the risk of loss. It refers to the way an
insurance company or organization can reduce its financial losses by
implementing measures that reduce the financial impacts of potential losses.
Techniques can be things that will prevent certain risks from arising,
minimizing the frequency or number of times that risk can happen, or even
minimizing the damage caused when a loss inevitably does occur.

2. Residual Risk – this risk is remained after the risk management options and
have been identified and actions plan have been implemented. Also, it can
include all initial unidentified risk as well as all risk previously identified and
evaluated but not the design for treatment at that time. Also, it is usually
assessed in the same way as you perform the initial risk assessment – you
use the same methodology, the same assessment scales, etc. What is
different is that you need to consider the influence of controls (and other
mitigation methods), so the likelihood of an incident is usually decreased and
sometimes even the impact is smaller.

3. Risk Reduction - Risk reduction is one of the four main risk management
techniques to be used in conjunction with other techniques to help an
individual or organization effectively manage the risk of loss. It refers to
the way an insurance company or organization can reduce its financial losses
by implementing measures that reduce the financial impacts of potential
losses. Techniques can be things that will prevent certain risks from arising,
 minimizing the frequency or number of times that risk can happen, or even
minimizing the damage caused when a loss inevitably does occur.

4. Risk Avoidance - eliminating any hazard that might harm the organization,
its assets, or its stakeholders; and removing the chance that the risk might
become a reality. This strategy aims to deflect as many threats as possible
to avoid their costly consequences. Risk avoidance strategy is designed to
deflect as many threats as possible to avoid the costly and disruptive
consequences of a damaging event. Also, is a specific type of approach to
managing risk, requiring a methodical process. Leaders must identify and
assess the risks their organization faces and determine how they will
eliminate the chances of those risks causing damage to the organization.

5. Risk Acceptance - is used when other risk response options are unavailable
or not optimal. Simply put, risk acceptance is a status quo risk response. Risk
owners acknowledge the risk exists but "accept" the risk with minimal
response. If the cost of other risk responses exceeds the value that would
be gained, a risk acceptance strategy may be appropriate. While it may seem
like a passive risk management strategy on the surface, to optimize risk
outcomes — especially when risk is assessed as moderate or high — risk
acceptance decisions may require active management.

6. Risk Sharing - is often implemented through employer-based benefits that

allow the company to pay a portion of insurance premiums with the employee.
In essence, this shares the risk with the company and all employees
participating in the insurance benefits.

7. Secondary Risks - “those risks that arise as a direct outcome of

implementing a risk response.” In other words, you identify risk and have a
response plan in place to deal with that risk.

B. 4 Example of Risk Avoidance

1. Business Strategy - A bank considers expanding its products to include

financial derivatives. After completing a business plan, the bank determines
 that the plan is risky and decides not to pursue the strategy.

2. Investing - An investment adviser recommends a stick to a client. The client

reads the company’s most recent financial report and finds it’s a complex
business with difficult-to-understand risk factors and decides against the
investment.

3. Health and Safety – A company shut down a construction site in bad

weather to avoid the risk that someone will get hurt.

4. Information Security – A retailer discontinues the collection of personal

data such as customers’ ages and telephone numbers to avoid the risk that
such data would be stolen in an information security incident.

D. 9 Example of Contingency Plan

1. Disaster- A school near the sea plans for a tsunami. This includes a
detailed evacuation route, procedures, roles and responsibilities, training,
and regular drills that are evaluated to drive improvements.
2. Environment – A city plans what will do if air quality reaches dangerous
levels. For example, they may identify sources of pollution that will be shut
down in an environmental emergency.
3. Infrastructure and Facilities – A firm plan what it will do if an entire
data canter goes offline for an extended period of time due to damage to
infrastructure such as solar panels, electrical grids, telecom networks,
roads, and/or the facility itself.
4. Partners – a firm plans what to do if they lose a major partner. For
example, an electronics manufacturer that makes contingency plans for the
loss of a core supplier
5. Talent – A firm relies on the instincts and creative talent of a chief
design officer who has consistently developed winning products. They plan
what to do if the designer leaves the firm. For example, they may plan a
professional development program that allows 6-12 designers to acquire the
abilities required to one day assume the chief design position.
6. Market – A firm plan what it will do if a major product update fails on the
 market.
7. Political – A company plans what to do if political instability impacts its
supply chain in a particular country or region
8. Trade – A company plans what it will do if a trade war and resulting trade
barriers cause their products to be uncompetitive in foreign markets.
9. Prices – A farmer plans what to do if corn prices fall dramatically such
that it is no longer a viable crop on her land.

E. 7 Types of Good Risks.

1. Positive risks - also called opportunity risks, are events or occurrences

that provide a possible positive impact on a company or project. These
opportunities can help companies reduce the costs of necessary project
resources.

2. Speculative risk - a category of risk that, when undertaken, results in an

uncertain degree of gain or loss. In particular, the speculative risk is the
possibility that an investment will not appreciate in value. Speculative
risks are made as conscious choices and are not just a result of
uncontrollable circumstances.

3. Calculated risk - a carefully considered decision that exposes a person to

a degree of personal and financial risk that is counterbalanced by a
reasonable possibility of benefit.”

4. Risk tolerance - is the level of risk an investor is willing to take. But

being able to accurately gauge your appetite for risk can be tricky. Risk
can mean opportunity, excitement, or a shot at big gains—a "you have to
be in it to win it" mindset.

5. Accepting risk - or risk acceptance occurs when a business or individual

acknowledges that the potential loss from a risk is not great enough to
warrant spending money to avoid it.
 6. Management risk is the risk—financial, ethical, or otherwise—associated
with ineffective, destructive, or underperforming management.

7. Failing well - or 'intelligent failure,' means acknowledging that failure

happens to the best of us, and building the skills needed to learn and
grow stronger from one's mistakes.

F. 8 Examples 0f Risk Prevention

1. Risk identification - a set of activities that detect, describe, and catalog all
potential risks to assets and processes that could have a negative impact on
business outcomes in terms of performance, quality, damage, loss, or
reputation.

2. Risk analysis - the process of identifying and analyzing potential issues that
could negatively impact key business initiatives or projects. This process is
done to help organizations avoid or mitigate those risks.

3. Risk avoidance - means you're trying to avoid compromising events to

eliminate liability exposures. Risk reduction is a way to help you control the
damages to your business, like claims or losses.

4. Risk reduction - defined as “significantly altering a major risk factor(s) for

a disease or health-related condition.”

5. Risk contingency - plan provides guidelines that address what an

organization should do if a hypothetical risk becomes a reality. Their intent
is to minimize the harm an undesirable sequence of events could do to an
organization and its assets.
 6. Risk minimization - the process of doing everything possible to reduce the
probability and/or impact of risk towards zero. This is reserved for risks
that are viewed as unacceptable to society, organization or individual.

7. Secondary risks -a “those risks that arise as a direct outcome of

implementing a risk response.” In other words, you identify risk and have a
response plan in place to deal with that risk.

8. Residual Risk – A portion of risk remaining after security measures have

been applied.

G. 9 Examples of Disaster Preparedness.

1. Prevention – Preventing disasters before they occur.

2. Laws and regulations such as an earthquake-resilient building code or laws

that govern behavior in a disaster such as the prohibition of price gouging.

3. Risk management – Identifying, assessing, and managing disaster-related

risks.
4. Resilience – Designing systems and structures to be resilient to stresses
such as a neighbourhood that grows some of its own food.
5. Infrastructure – that prevents or mitigates a disaster.
6. Systems – such as a tsunami early warning system that warns people of an
incoming tsunami and asks that they proceed predefined shelters and escape
routes
7. Planning – creating a plan for what you will do in the case of a disaster
8. Training – for basics survivals skills and how to help others.
9. Supplies and equipment – Stocks of things that will be needed in the first
days of an emergency such as water, food, first-aid supplies, safety
equipment, illumination, shelter, insulation, navigation, and communication
tools.