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L3 Risk Evaluation

This document discusses risk evaluation, which involves comparing the results of a risk analysis to established risk criteria to determine if additional action is needed. It describes how a risk evaluation matrix can assess business exposure based on the frequency and severity of potential risks. The document outlines different risk levels - risk retention, risk transfer, risk reduction, and risk avoidance - and the corresponding management responses that should be considered for each level according to the frequency and severity of identified risks.

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187 views13 pages

L3 Risk Evaluation

This document discusses risk evaluation, which involves comparing the results of a risk analysis to established risk criteria to determine if additional action is needed. It describes how a risk evaluation matrix can assess business exposure based on the frequency and severity of potential risks. The document outlines different risk levels - risk retention, risk transfer, risk reduction, and risk avoidance - and the corresponding management responses that should be considered for each level according to the frequency and severity of identified risks.

Uploaded by

princessbernadethcabaltican
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

RISK

EVALUATION
Amelyn D. Sadang
LEARNING
OUTCOMES
▪ Describe the principles of risk evaluation.
▪ Summarize the factors to consider in risk analysis.
▪ Discuss the importance of risk evaluation to risk assessment.
WORDS TO REMEMBER
RISK EVALUATION is a process that is used
to compare risk analysis result with risk
criteria in order to determine whether or not a
specified level of risk is acceptable or tolerable.

RISK EVALUATION MATRIX is a


management tool which accurately assess
business exposure, based on the frequency and
severity of identified potential risk.
A. RISK ASSESSMENT
AND RISK EVALUATION
❖The purpose of risk evaluation
is to support decisions.

❖Risk evaluation involves


comparing the result of the risk
analysis with the established
risk criteria to determine where
additional action is required.
5

THIS CAN LEAD TO A DECISION TO:

• Do nothing further;
• Consider risk treatment options;
• Undertake further analysis to better
understand the risk;
• Maintain existing controls; and
• Reconsider objectives.
6

Risk Evaluation Matrix

❖Cuskelly and Auld (1989) suggest the


use of a risk evaluation matrix
containing four management response
options according to the level of
identified risk which include risk
retention, risk transfer, risk reduction,
and risk avoidance.
7
8

Risk Evaluation Matrix

❖ Wilks and Davis (2000) defined the


level of identified risk as follows:

Risk retention is where both the


frequency and severity of risk is low, risk is
often retain. This is a form of self-
insurance, whereby the business operator
assumes and accepts a certain level of
losses.
9

Risk Evaluation Matrix

❖ Wilks and Davis (2000) defined the


level of identified risk as follows:

Risk transfer is where the frequency of


risk potential is low, but the severity of a
potential incident is high, the most
common and traditional approach to risk
management is transferring responsibility
to other parties.
10

Risk Evaluation Matrix

❖ Wilks and Davis (2000) defined the


level of identified risk as follows:

Risk reduction is where the severity of


potential risk remains low, but the overall
frequency of risk is increasing business
operators need to consider ways of
reducing their exposure.
11

Risk Evaluation Matrix

❖ Wilks and Davis (2000) defined the


level of identified risk as follows:

Risk avoidance is where frequency and


severity of risk potential are both high,
business operators should consider
cancelling a program or activity.
THANK YOU!

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