Page 48 - EBOOK RISK MANAGEMENT

5.0 RISK MANAGEMENT TECHNIQUES

5.1 Risk Management Techniques

Once the risk has been assessed, the next step is to examine all possible ways to

handle risk in order to select the best and the most cost-effective risk management

programme. There are two classification of risk management techniques:

Risk Avoidance

Risk Management Techniques Risk Reduction Self-Insurance
Risk Control
Risk Prevention

Risk Retention
Captive Insurers
Risk Financing
Insurance
Risk Transfer Hedging
Non-insurance
Hold-harmless
agreement

Figure 5.1 Risk Management Techniques

5.1.1 Risk Control

Risk control refers to all measures other than risk avoidance designed to to reduce

the frequency and severity of losses. It will preventing the loss from occuring

a) Risk Avoidance

Risk avoidance is one type of risk control which it will eliminate any exposure to risk
that poses a potential loss to zero or does not take place at all. Risk will proactively

avoided or abandoned due to certain reasons. As an example, if Khuzairi want to

avoid the risks associated with the ownership of property, he should not purchase
property but lease or rent instead. Another example of risk avoidance is, if the use

of a particular product is hazardous, a company should not manufacture or sell it.
This is a negative rather than a positive technique. It is sometimes an unsatisfactory

39