Page 39 - CommerceMagazine_Sat_Vanijya
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THE PROCESS
Business have several alternatives for the
management of risk, including avoiding, assuming, reducing or
transferring the risk. Avoiding risks, or loss prevention, involves
taking steps to prevent a loss from occurring by such methods
as employee safety training. As another example, a
pharmaceutical company may decide not to market a drug
because of the potential liability. Assuming risks simply means
accepting the possibility that a loss may occur and being
prepared to pay the consequences. Reducing risks, or loss
reduction, involves taking steps to reduce the probability or the
severity of a loss, for example by installing fire sprinklers.
Transferring risk refers to practice of placing responsibility for a
loss on another part by contract. The most common example of
risk transference is insurance; it allows a company to pay a small
monthly premium in exchange for protection against
automobile accidents, theft or destruction of property, employee
disability or a variety of other risks.
