Yesterday, I happened to meet an insurance agent (a long time friend of mine). As we chatted about old times and our work the discussion moved to sarbanes oxley and how it was affecting the corporate world. My friend remarked that as companies go in for insurance to transfer their business risks, there were many ways in which company's could handle risk. He said that his job not only involved identfying, evaluating and analyzing business risks for his clients, but also determining measures availabel for treating risks assessing the options and implementing a risk treatment plan. I am sure this would not be new for many of my readers, but anyway, here's what he had to say on "How to treat risk"?

Accept the Risk - This is the easiest way of handling risk. The organization or business simply chooses to live with the risk. This approach is generally not recommended.

Transfering the Risk - Businesses can transfer their risk either fully or in part to another party i.e. an insurance company.

Avoid the Risk - This is also an option available where risk is avoided by choosing a different process or altering the business.

My friend discussed two other options for treating risk. One he said was to reduce the likelihood of the risk occuring and second was to reduce the consquences of the risk. Most companies according to him are taking this approach to treating risk by reducing the likelihood and consequences of risks. Well, thanks Jeff for your insight on risk treatment :-).

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