Risk Assessment and Treatment

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Risk Assessment and Treatment
Risk management process is the systematic application of management policies, procedures and practices to the assessment, treatment, controlling, and monitoring of risk.
Risk Assessment
Risk assessment is the overall process of risk identification, analysis, and evaluation. Risk identification is the starting point for understanding and managing risks and/or crucial activities
Risk analysis involves developing an understanding of the risk. It provides an input to risk evaluation and to decisions on the most appropriate strategies and techniques for risk treatment
Risk evaluation is undertaken to assist in making decisions, based upon the outcomes of risk analysis, about which risks need treatment and the priority for treatment implementation.

Risk Treatment
One important aspect of the risk management framework is the risk treatment. Risk treatment is about considering options for treating risks, evaluating those options, preparing the risk treatment plans and implementing those plans to achieve the desired outcome.
Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories;

•Risk Transfer: Risk Transfer means that the expected party transfers whole or part of the
losses consequential o risk exposure to another party for a cost. The insurance contracts
fundamentally involve risk transfers. Apart from the insurance device, there are certain other
techniques by which the risk may be transferred
•Risk Avoidance: Avoid the risk or the circumstances which may lead to losses in another
way, includes not performing an activity that could carry risk. Avoidance may seem the
answer to all risks, but avoiding risks also means losing out on the potential gain that
accepting (retaining) the risk may have allowed. Not entering a business to avoid the risk of
loss also avoids the possibility of earning the profits.
•Risk Retention: Risk retention implies that the losses arising due to a risk exposure shall be
retained or assumed by the party or the organization. Risk retention is generally a deliberate
decision for business organizations inherited with the following characteristics. Self-insurance
and Captive insurance are the two methods of retention.
•Risk Control: Risk can be controlled either by avoidance or by controlling losses. Avoidance
implies that either a certain loss exposure is not acquired or an existing one is abandoned.

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