Risk treatment occurs after risks have been identified, evaluated and assessed. Treatment can include avoidance, acceptance, mitigation, transfer (for example, insurance), separate, and optimize and exploit. ERM often produces novel risks that require novel treatment. What organizations are beginning to understand is that proper treatment can be used not just to reduce the cost of loss but also increase the bottom line. Examples of exploitation include venturing into niche markets where others have been unable to control loss, or using risk control techniques to increase reputation and by doing so increase revenue and the acquisition of more profitable business.
Associate Professor at Paris 1 Panthéon-Sorbonne University, Paris
Formerly Université Paris 1 Panthéon-Sorbonne, Directeur pédagogique du CARM Institute, Paris, France
Director of consulting firm Abbey Consulting
Warren Buffett (Chairman and CEO, Berkshire Hathaway) once said: “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that you'll do things differently.” The teachings to draw from this quote are manifold. Firstly, it demonstrates that risk is a social construct (Douglas and Wildawsky, 1982). Secondly, it shows that people tend to perceive it as a threat and totally miss the dual aspect of risk, i.e. the potential opportunities. ...