What is involved in treating risks? Give examples to support your answer

 

Risk treatment involves ways of how companies or businesses cope with unacceptable risks. Some of these risks need immediate actions, while others can be resolved later on. For an individual or firm to decide which risks to settle, several factors have to be taken into account: treatment method, involved costs, persons responsible for handling the treatment, benefits from the results of treatment, the likelihood of success.

Risk treatment can be done internally through avoidance or reduction. Risk treatment can also be financially through acceptance or transfer.

Risk avoidance is when you decide not to go through with an activity or action that will likely result in the risk. For example, a semi-skilled phone repair person who does not have the appropriate tools to open up a phone without breaking the screen, instead of taking his chances he will give this task to another skilled phone repair person with the appropriate tools.

Risk reduction is when firms or individuals make the chances of the risk occurring by taking specific actions such as compliance, training, and quality control. From the above example, the phone repair person to reduce the risks of damaging phone screens will improve his skills by more practice and purchasing the proper equipment.

Risk reduction also entails reducing the effects of the risk already occurred. For example, a company may decide to have a back of all its data in the cloud or a data management firm. In case of data loss from the damage of their storage by either fire, hard disk failures, they have a backup of all their data.

Transfer of the risk will involve shifting all or sharing the risk to either an insurance company or partnerships. For example, an individual may decide to have an insurance cover on himself and his motor vehicle in case of an accident.

Risk acceptance is when the risk cannot be avoided. This will mean one is fully prepared financially and through any other means to take the risk head-on.