Risk Management Techniques

There are four risk management techniques

  1. risk avoidance
  2. loss control
  3. risk retention
  4. risk transfer

These techniques work for pure risks (chance of loss but no chance of gain) but not speculative risks (chances of gain or loss, as with stock market). Insurance reduces uncertainty about nonspeculative financial losses. There are requirements for insurable risks.

Risk Avoidance

  • elimination of risk at any cost (e.g., drop a hazardous product)
  • most aggressive and effective … but not practical
    • eg, staying in bed all day to avoid risk of injury or death

Loss Control

  • loss prevention: reduce frequency of loss
    • usually impossible or impractical
      • (e.g., to maintain income —> insurance or adopt a healthier lifestyle
  • loss reduction: reduce the severity and financial impact
    • eg, upon disability —> physical rehabilitation, crosstrain a backup
  • safety measures, pooling, segregating (e.g., key employees travel separately), diversifying (not imperiling group by one member’s actions)

Risk Retention

Risk Transfer

  • noninsurance
    • eg, relatives help out
  • insurance
    • formal arrangement between you and an insurer

PS Network

Market Better
twitter.png Twitter
blogger.png Blog
marketingreflections.png Newsletter
Spark Insight
website.png Website
Grasp Risk
twitter.png Twitter
blogger.png Blog
website.png Podcast
website.png Website
Tame Risk
website.png Taxevity
Unless otherwise stated, the content of this page is licensed under Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License