Page 62 - EBOOK RISK MANAGEMENT

Risk Management Technique

1) Risk Avoidance
 Known as risk elimination

 Refers to avoid completely the activity that potentially have a risk of loss

 Reduce the probability of loss to zero
 Require sacrifice of high opportunity cost

 Example to handle fidelity risk:
 Avoid recruit new staff

 Avoid assigning an inexperience staff to handle risky
transaction

 Fired the problematic staff

2) Risk Control

 Known as loss control

 Refers to effort in minimizing the probability of loss (loss frequency) and
loss severity

 Require organizations to take into account both the benefit of

implementing risk control programme and additional cost to run
programme

 Separation of duties
 Divided into loss reduction and loss prevention

 Loss reduction designed to reduce the severity of loss
 Example of loss reduction in handling fidelity risk

 Purchase fidelity insurance

 Loss prevention designed to reduce the frequency of loss
 Example of loss prevention in handling fidelity risk

 Provide competency improvement training

 Thoroughly scan applicant’s background during staff recruiting
interview

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