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Risk Handling Description

Strategy

Avoidance Danger avoidance is the practice of abstaining from any ac-

tion that may involve risk. A risk avoidance approach seeks to re-

duce potential threats. Risk avoidance as well as mitigation may be

accomplished by policy and procedure development, education and

training, and technology adoption. Assume X-Axis hospital want to

purchase energy from an electrical firm, but electricity rates have

been down dramatically in recent months. Political risk is inherent in

the generation of energy, as is credit risk inherent in the power firm.

Risk avoidance occurs when X-Axis hospital evaluates the dangers

involved with the oil business and chooses not to invest in the firm.

However, X-Axis Hospital is presently at danger of systemic

failure as a result of the economic slump. It may mitigate this risk by

the use of a hedge. For instance, X-Axis hospital may safeguard its

long holdings and mitigate risk by purchasing put options on such

positions. The hospital is safeguarded against a possible decline in

portfolio value since it is able to deliver its treatments at a fixed

price for a certain length of time. Investors who shun risk forgo any

possible profits associated with the power stock. On the other ex-

treme, the investor who minimizes risk retains the possibility of

profit (Kaur & Singh, 2018). His long investments will gain in value if

the stock market continues to rise. His put options, on the other
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hand, protect him if the value of his holdings decreases.

Transference Physical security is yet another risk transfer function that

third-party firms may do. External security is often a better alterna-

tive than an internal solution due to economies of scale. Intermedi-

aries are often employed to save costs or to free up time to concen-

trate on key capabilities. These same reasoning may be used to jus-

tify a risk transfer approach. Rather than developing risk reduction

solutions for specific business tasks or processes, enterprises may

consider outsourcing risk acceptance to third parties. For instance,

many operationally risky company tasks – such as customer sup-

port, contact centre, or payment services – may readily be out-

sourced.

Also, third-party usage of technical features like systems and

network security management is possible. Experts that specialize in

certain areas frequently make the most operational and economic

sense when these tasks influence total risk and technology integra-

tion becomes more complicated. Utilizing SaaS is similar to using

third-party suppliers (Mascini & Bacharias, 2012). The SaaS

provider assumes the technical and recovery risks, as well as any

commercial risks.

Considering the services, recovery assurance, contractual ar-

rangements, change processes, and risk mitigation methods is cru-

cial for any third-party vendor relationships. Assume the job of X-

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Axis hospital current service providers in risk reduction. They may

provide services that your company might outsource to focus on

strategic competencies and business development.

Mitigation Risk mitigation reduces X-Axis hospital’s exposure to

potential dangers and the likelihood of them reoccurring. Risk

mitigation is another component of risk assessment. An organisation

must act to reduce risks as well as detect and assess them. A

corporation may utilize a range of risk mitigation techniques to

manage various risks, such as minimizing and reducing risk. A risk

avoidance approach seeks to eliminate rather than minimize a given

risk. Delaying a dangerous project, for example, helps a company

avoid it.

Another risk mitigation method is reducing risk, which entails

lowering the probability of a risk occurring or lowering the severity of

the risk's repercussions. Controls are one technique to mitigate risk.

Additionally, a business might use effective project management

techniques to evaluate and reinforce plans. Agile teams strive to

provide value to the organisation by continually minimizing risk

(Kaur & Singh, 2018). Risk managers and company executives may

use agile project management practices to help their organizations

achieve their risk reduction objectives.

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References

Kaur, M., & Singh, R. (2018). Risk and Risk-Handling Strategies in Construction Pro-

jects. International Journal of Management Studies, 5(1(4)), 01. https://doi.org/

10.18843/ijms/v5i1(4)/01

Mascini, P., & Bacharias, Y. (2012). Integrating a Top-Down and a Bottom-Up Ap-

proach: Formal and Informal Risk-Handling Strategies in a Utility Company. Risk

Analysis, 32(9), 1547–1560. https://doi.org/10.1111/j.1539-6924.2011.01778.x