![]() ![]() ![]() The risk response is to take out insurance and reduce the financial impact in case the product is damaged. It is not willing to accept the risk in case of damage. Transfer the risk (threat) The company transports high value goods across country. The unknown risk that resides afterward is what we are taking about in this article. There are always unforeseen consequences of taking any action, so there is always an element of risk associated with the unknown. It’s impossible for management to identify every single threat for a course of action. Start-up companies, on the other hand, are more aggressive in nature and tend to go after riskier opportunities.Īfter the management identifies how much risk they are willing to take, the team analyzes the opportunity for everything they think could go wrong and cause the company to lose money. Banks, for example, normally follow a conservative path and do not accept risk easy. This concept not only applies to threats to a business, but also to opportunities.Ĭompanies assess their risk appetite to see what level of risk they are comfortable with taking. The process to minimize the impact on the business may still leave the company vulnerable with an exposed risk. What is the definition of residual risk? This is that portion of risks which was not eliminated by management actions at first. In other words, it’s the danger that there will be a loss causing threat that isn’t identified and taken into consideration. Definition: Residual risk, also called inherent risk, is the balance of risk exposure after identifying and acting on all known threats.
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