Risk Response

Risk Response

Risk Response Jonathan Poland

Risk response is the process of addressing identified risks in order to control or mitigate their impact. It is an integral step in the risk management process and involves making decisions about how to address each identified risk. This planning and decision-making process involves stakeholders deciding on the most appropriate course of action for each risk.

Risk response can involve taking steps to eliminate the risk, reduce its likelihood or impact, transfer the risk to another party, or accept the risk. The chosen response should be based on an assessment of the potential costs and benefits of each option, as well as the organization’s risk tolerance and capacity. By effectively responding to identified risks, organizations can minimize the impact of potential negative events and maximize their chances of success. The following are the basic types of risk response.

Avoid
Change your strategy or plans to avoid the risk.

Mitigate
Take action to reduce the risk. For example, work procedures and equipment designed to reduce workplace safety risks.

Transfer
Transfer the risk to a third party. For example, purchase fire insurance for an unfinished building.

Accept
Decide to take the risk. Generally speaking, all strategies and plans involve some level of risk. Risk also has a relationship with reward whereby reducing risk towards zero can also reduce potential payback.

Share
Distributing the risk across multiple partners, teams or projects. For example, four projects each have a software architect and each identifies the risk that the software architect is a critical resource. They decide to share the risk by pooling the software architects into a team that provides a service to all four projects. If one architect quits, the service can be continued.

Contingency
Making plans to handle the risk if it occurs. For example, back-out procedures that can restore a system if a launch fails.

Enhance
Enhancement is a response for a positive risk. Project management methodologies may view finishing a task early or under budget as a positive risk. Enhancement is an action that is taken to increase the chance of the risk occurring.

Exploit
Another treatment for positive risks. Exploiting a risk is to make use of resources that become available if the risk occurs. For example, if a task finishes early, you plan to reassign the resource to more work.

Learn More
Competitive Threats Jonathan Poland

Competitive Threats

A competitive threat is a potential source of competition that has not yet materialized, but has the potential to do…

Decision Framing Jonathan Poland

Decision Framing

Decision framing refers to the way in which a choice or dilemma is presented or structured. This includes the language…

IT Architecture Jonathan Poland

IT Architecture

An IT architecture is a framework that describes the components of an information technology (IT) system, how they work together,…

Inverted Yield Curve Jonathan Poland

Inverted Yield Curve

The inverted yield curve is a financial phenomenon that has garnered significant attention because of its historical association with upcoming…

Business Assets Jonathan Poland

Business Assets

In business, assets are useful property that are owned by the company. These assets can be divided into three categories:…

Trade Secret Jonathan Poland

Trade Secret

A trade secret is a type of carefully guarded information that gives a company a competitive advantage in the market.…

Key Strengths Jonathan Poland

Key Strengths

Key strengths are talents, character traits, and knowledge that are particularly relevant to a given role. These are often listed…

Risk Contingency Jonathan Poland

Risk Contingency

A risk contingency plan is a course of action that is put in place to mitigate the negative consequences of…

Due Diligence Jonathan Poland

Due Diligence

Due diligence refers to the level of investigation, care, and judgement that is appropriate and expected in a given situation.…

Content Database

Search over 1,000 posts on topics across
business, finance, and capital markets.

Conceptual Framework Jonathan Poland

Conceptual Framework

A conceptual framework is a theoretical structure that represents and organizes a set of concepts and ideas. It is used…

Employee Retention Jonathan Poland

Employee Retention

Employee retention refers to the success of a company in keeping its talented employees from leaving. High employee turnover can…

Fixed Costs Jonathan Poland

Fixed Costs

Fixed costs are expenses that remain constant regardless of changes in a company’s level of production or sales. These costs…

What is Greenwashing? Jonathan Poland

What is Greenwashing?

Greenwashing refers to the act of making false or misleading claims about the environmental benefits of a product or company…

Cottage Industry Jonathan Poland

Cottage Industry

A cottage industry is a small-scale, home-based business or economic activity that is typically run by a single person or…

Types of Market Research Jonathan Poland

Types of Market Research

Market research is the process of systematically gathering and analyzing information about a market, including customers and competitors. This information…

Employee Costs Jonathan Poland

Employee Costs

Employee costs refer to all of the expenses that are incurred when hiring and employing an individual. These costs go…

Technology Factors Jonathan Poland

Technology Factors

Technology factors are any external changes related to technology that may affect an organization’s strategy. Identifying and analyzing technology factors…

Turnaround Management Jonathan Poland

Turnaround Management

Turnaround management is a specialized form of management that involves developing and implementing strategies and plans to rescue an organization…