What Is Risk Control?

Risk control means that risk managers take various measures and methods to eliminate or reduce the possibility of risk events or reduce.

Risk control methods

The four basic methods of risk control are risk aversion and risk avoidance.

1, risk avoidance

Risk avoidance is that investors consciously abandon risk behaviors and avoid specific loss risks.

Simple risk avoidance is the most negative way to deal with risks, because investors often abandon potential risks while giving up potential risks.

Therefore, this method is generally adopted only in the following circumstances:

(1) investors are extremely disgusted with risks.

(2) other schemes that achieve the same goals are less risky.

(3) investors are unable to eliminate or pfer risks.

(4) the investor is incapable of undertaking the risk, or the risk is not adequately compensated.

2. Loss control

Loss control is not the abandonment of risk, but the formulation of plans and measures to reduce the possibility of loss or to reduce actual losses.

The control stage includes three stages, namely, before, after and after.

The purpose of pre event control is to reduce the probability of loss, and the control of events and afterwards is mainly to reduce the actual loss.

3. Risk pfer

Risk pfer refers to the pfer of risk to the pferee through the contract.

The risk pfer process can sometimes greatly reduce the risk level of the economic entity.

The main form of risk pfer is contract and insurance.

(1) pfer of contracts.

By signing a contract, some or all of the risks can be pferred to one or more other participants.

(2) insurance pfer.

Insurance is the most widely used way of risk pfer.

4, risk retention

Risk retention is risk-taking.

That is to say, if the loss occurs, the economic entity will pay any funds available at that time.

Risk retention includes unplanned retention and planned self insurance.

(1) unplanned retention.

It refers to the payment of income after the risk loss occurs, that is, the arrangement of funds before loss.

When the economic entity is not aware of the risk and believes that the loss will not occur, or will be aware of the maximum possible loss related to the risk of a significant underestimation, it will adopt the unplanned retention way to take risks.

Generally speaking, no capital reservation should be used prudently, because if the actual total loss is far greater than the estimated loss, it will cause difficulties in capital turnover.

(2) planned self insurance.