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4 Types of Risk Reduction

 , updated on November 17, 2016
Risk reduction is a collection of techniques for eliminating risk exposures. It is typically applied to lower risk probabilities and impacts to suit the risk tolerance of an individual or organization. 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
TypeRisk
DefinitionReducing risk exposures by avoiding, mitigating, transferring or sharing risks.
Related ConceptsRisk
Risk Acceptance
Risk Management
Risk Mitigation
Risk Taking
Risk Tolerance

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