Risk Management Strategies

What are Risk Management Strategies?

Risk Management Strategies involve an organisation’s decision about treating the Risk. The firm can do one of the following:

• Accept Risk: A firm could decide to accept (i.e., retain) known Risks.
• Avoid Risk: Sometimes, the best strategy is to avoid Risk.
• Mitigate Risk: Businesses that choose to maintain risks may strategically seek ways to mitigate known risks.
• Transfer Risk: Risk can also be transferred to a third party

Example

An example of Risk Mitigation is that Manufacturers might mitigate rising labour costs by investing in automation, and transportation companies might mitigate rising fuel costs by upgrading planes, trucks, and/or other vehicles to more fuel-efficient versions.

Why is it essential to know this?

They form the basics of Risk Management and should be understood well. There are only four ways to tackle any risk, and understanding them plays a significant role in making informed risk management decisions.

Check our track on Risk: Interest Rates and Hedging