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4 Types of Risk Reduction

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Risk reduction is an action or inaction designed to decrease the potential for future losses. This includes strategies to reduce the probability of a risk occurring and strategies to reduce the impact if a risk does occur. Generally speaking, there are four ways to reduce risk:

Risk Avoidance

Avoiding an activity or position that may cause risk. For example, a business may decide that a new product strategy is too risky to pursue.

Risk Mitigation

Pursuing an activity but finding ways to reduce its associated risks. For example, an amusement park can mitigate safety risks by eliminating latent human error in their maintenance procedures.

Risk Transfer

Paying to transfer risks to an insurance company or business partner.

Risk Sharing

Finding ways to reduce risks by pooling resources with others. For example, a group of companies may reduce the risk of losing key executives by planning to transfer resources on a temporary basis in the case of an unexpected loss.
Overview: Risk Reduction
Type
Definition
Reducing risk exposures by avoiding, mitigating, transferring or sharing risks.
Related Concepts
Next: Risk Mitigation
More about risk reduction:
Accept
Avoid
Contingency
Control
Insurance
Mitigate
Prevent
Reduce
Reduce
Response
Risk Measurement
Sharing
Transfer
More ...
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