Other examples of this option can include halting the production of a particular product, selling a division of the company, or deciding against an expansion. Most organizations decided to avoid the risk of their employees getting sick. Like I discuss in the intro section above, executives and managers will choose this option for any risks that could get the company in major legal trouble or lead to someone getting killed.Ī recent example of this is the shift to working from home to prevent employees from contracting COVID-19.
When you choose to avoid a risk, you are cutting off any possibility of it posing a threat to your enterprise. Risk Response Strategy #1 – AvoidĪs the name implies, quitting a particular action or opting to not start it at all is an option for responding to a risk. Without further ado, below are 5 potential risk response strategies to consider for handling strategic, operational, legal, or other risks and opportunities. (To learn more check out Risk Monitoring: 6 Considerations for Understanding this Make or Break Moment for ERM.) Remember too that your risk response strategy can change over time as conditions warrant, which is why consistent monitoring of risks and the broader environment is so important. Risk appetite is one of several tools for helping you determine the right response strategy, but contrary to the original version of this article, it is by no means the only or always the best as this piece from Norman Marks explains. The first four response strategies below are very traditional in nature and, as Hans Læssøe discusses in his book Prepare to Dare on the different levels of risk management, well established.Ī variety of factors internal to your organization will drive which of the following options management chooses. It’s a common misnomer that risk management is all about reducing harm or averting failure, but as we’ll get into more later, this isn’t always the case and can, in fact, lead to failure. In some cases, reducing or avoiding risks is the best choice, especially if the alternative means breaking the law or someone getting hurt or killed. You, your team, executives, and risk owners have done the work of identifying, assessing, and analyzing risks and opportunities, so the question that naturally comes up is – now what?
The core theme of this piece from the beginning has really been about answering one basic question. Like other popular posts, such as this comparison of traditional risk management and ERM, it’s important to take a step back and re-examine this topic for two main reasons: changes in perspective since the article was first published and the blog‘s considerable growth has resulted in more resources to support the sections below. The original version of the following article has been one of the most popular here at my blog. Risk and uncertainty are much the same I suppose… We can’t control what people say to us – we can only control our response.
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