There are several components of risk response that are applicable to both qualitative and quantitative risk assessments equally. Risk Management must address each distinct risk after the risk analysis is finished. There are various ways to react to risk:
- Mitigation
- Assignment
- Deterrence
- Avoidance
- Acceptance
- Rejection
All of these risk reactions are influenced by an organisation’s risk tolerance and appetite. The entire amount of risk that an organisation is willing to take on overall across all assets is known as its risk appetite. The amount of risk that an organisation can manage is referred to as its risk capacity. The desired risk appetite of an organisation may exceed its actual capacity. The quantity or degree of risk that a company is willing to take on for each unique asset-threat pair is known as risk tolerance. This frequently has something to do with a risk objective, or the preferred amount of risk for a certain asset-threat relationship. The highest degree of risk over the risk target that will be tolerated before additional risk management measures are applied is known as a risk limit.
You should be aware of the following details regarding potential risk reactions:
Risk Mitigation: Reducing risk, also known as risk mitigation, refers to the process of putting safety measures, security controls, and countermeasures into place in order to lessen and/or eliminate vulnerabilities or thwart threats. Common instances of risk mitigation or reduction include implementing encryption and utilising firewalls. Even after mitigation or reduction measures, some risks often persist despite their elimination in some cases.
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Risk Transfer: Risk transfer, also known as assignment of risk, is the process of shifting ownership of a loss resulting from a risk to another entity or organisation. Outsourcing, traditional insurance, and purchasing cybersecurity are examples of common ways to assign or shift risk. sometimes referred to as “transfer of risk” and “assignment of risk.”
Risk deterrence: is the practise of putting deterrents in place for potential policy and security violators. The objective is to dissuade a threat agent from attacking. Examples include putting in place auditors, security cameras, and warning banners; employing security guards; and making it clear that the company is prepared to work with law enforcement and pursue individuals responsible for cybercrime.
Risk Avoidance: Choosing alternatives to the default, typical, expedient, or inexpensive option that have lower associated risks is known as risk avoidance. Risk avoidance strategies include, for instance, choosing to fly to a location rather than driving there. Another illustration is moving a company from Florida to Arizona in order to avoid hurricanes. Eliminating the root of the problem reduces the risk. Another example of risk avoidance is a corporate leader quitting a venture because it does not fit with organisational goals and has a high risk-to-reward ratio.
Risk acceptance: is the outcome of a cost-benefit analysis that reveals the costs of countermeasures would be greater than the potential costs of loss due to a risk. Additionally, it indicates that management has consented to bear the costs and losses if the risk materialises. Accepting risk typically necessitates a clearly written declaration, typically in the form of a document signed by senior management, that explains why a precaution was not applied, who made the decision, and who will bear the loss if the risk materialises.
Risk Rejection: Rejecting or ignoring risk is an unacceptable possible response. There is no logical or wise way to respond to risk by exercising proper care or attention if you deny that a risk exists and hope it never materialises. Courts may view rejecting or dismissing risk as negligence.
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