Risk Options
Risk mitigation measures are usually formulated according to one or more of the following major risk options, which are:
- Design a new business process with adequate built-in risk control and containment measures from the start.
- Periodically re-assess risks that are accepted in ongoing processes as a normal feature of business operations and modify mitigation measures.
- Transfer risks to an external agency (e.g. an insurance company)
- Avoid risks altogether (e.g. by closing down a particular high-risk business area)
Later research has shown that the financial benefits of risk management are less dependent on the formula used but are more dependent on the frequency and how risk assessment is performed.
In business it is imperative to be able to present the findings of risk assessments in financial, market, or schedule terms. Robert Courtney Jr. (IBM, 1970) proposed a formula for presenting risks in financial terms. The Courtney formula was accepted as the official risk analysis method for the US governmental agencies. The formula proposes calculation of ALE (annualised loss expectancy) and compares the expected loss value to the security control implementation costs (cost-benefit analysis).
Read more about this topic: Risk Management
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