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What is Secondary Risk?
John Spacey, August 21, 2015 updated on March 20, 2021
Secondary risk is a new risk that is the result of risk treatments. In general, nothing is without risks and attempts to avoid or transfer risks typically trigger new risks. In some cases, secondary risks can be worse than primary risks. In other words, attempts to manage risk can potentially result in an overall increase in risk. The following are a few examples of secondary risks:
1. Risk AvoidanceAn aircraft manufacturer cancels the development of a new aircraft model to avoid the mounting risks associated with the project. The cancellation avoids the project risks but adds the secondary risk that competitors will come out with more advance models and sales will decline.
2. Risk ReductionA student reduces the risk that she will fail a math exam by staying up all night studying. This action increases the risk that she will get in an accident driving in the morning after staying up all night intensely concentrating.
3. Risk TransferA homeowner transfers the risk of a flood to an insurance company by purchasing flood insurance. Their is a secondary risk that a major flood will cause the insurance company to go bankrupt and it will be unable to pay.
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