| decoration: underline;”> FOLLOWING RISK AVOIDANCE There are various types of approaches for managing the risks but there are some important types of risks that occur frequently. The best common way of managing the risk is nothing but avoiding it, firstly. In the same time without risk no companies can run successfully. We cannot avoid the risk in all time in these types of situations. We require the capability to manage the risk. For example: A company should take the relevant risks all time and not to take the unnecessary risks like recruiting a candidate who is not fitted for the particular designation. When a company uses risk avoidance that brings no false activity take place.
CONTROLLING THE LOSS Loss control is nothing but a company should make an attempt to control loss before that it occurs, and they should think the possibilities of the occurrence of the loss and they should avoid it by taking the safety measures. For example: An insurance brooking sector may decide to keep a certain percentage of funds in readily marketable assets. COMBINATION BUSINESS Combination is a type of technique of combining one or more business that helps to reduce the risk all time. This also can be called as “DIVERSIFICATION”. This helps to avoid loss. For example: An insurance broking sector should not only concentrate in selling the insurance policies alone, but they should also concentrate in mutual funds and shares. SEPARATION IN BUSINESS Separation is a type of technique differentiated into various parts for avoiding risk. For example: A firm instead of sourcing its raw materials from a single supplier it can source its raw materials from a number of suppliers in the same time the firm to avoid the risk of loss arising if a single supplier goes out of the business. TRANSFERRING THE RISKS Another approach is Transferring the risk to another party where the party is ready to bear it and this type of approach can be handled in three ways. 1) Transferring the asset: If a firm has various businesses in this case the firm can sell one of them to another party and along with that it can also transfer the risks involved in transferring the asset. 2) Without transferring the asset: This being done by hedging the derivatives. 3) Risk financing: A firm may insure in order to avoid risks like losses. RETENTION OF RISK This mainly depends on the firm’s capacity to face the risks. This risk is being retained only when there is no way to avoid the risks. SHARING OF RISK This is a combined form of risk retention and risk transfer. These are all the approaches to risk management. Users who found this page were searching for:
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