Question

A number of controls further define treatment of risk discuss these controls

Answer 1

Modern businesses face a diverse collection of obstacles, competitors, and potential dangers. Risk control is a plan-based business strategy that aims to identify, assess, and prepare for any dangers, hazards, and other potentials for disaster—both physical and figurative—that may interfere with an organization's operations and objectives. The core concepts of risk control include:

• Avoidance is the best method of loss control. For example, after discovering that a chemical used in manufacturing a company’s goods is dangerous for the workers, a factory owner finds a safe substitute chemical to protect the workers’ health.
• Loss prevention accepts a risk but attempts to minimize the loss rather than eliminate it. For example, inventory stored in a warehouse is susceptible to theft. Since there is no way to avoid it, a loss prevention program is put in place. The program includes patrolling security guards, video cameras and secured storage facilities. Insurance is another example of risk prevention that is outsourced to a third party by contract.
• Loss reduction accepts the risk and seeks to limit losses when a threat occurs. For example, a company storing flammable material in a warehouse installs state-of-the-art water sprinklers for minimizing damage in case of fire.
• Separation involves dispersing key assets so that catastrophic events at one location affect the business only at that location. If all assets were in the same place, the business would face more serious issues. For example, a company utilizes a geographically diverse workforce so that production may continue when issues arise at one warehouse.
• Duplication involves creating a backup plan, often by using technology. For example, because information system server failure would stop a company’s operations, a backup server is readily available in case the primary server fails.
• Diversification allocates business resources for creating multiple lines of business offering a variety of products or services in different industries. A significant revenue loss from one line will not result in irreparable harm to the company’s bottom line. For example, in addition to serving food, a restaurant has grocery stores carry its line of salad dressings, marinades, and sauces.