A range of issues will have to be considered when making decisions on the treatment of risks. Consideration will have to be given to all risks and their priority level in comparison to each other. The ability to treat risks will depend to a large extent on the resources available. The most important of these is financial. It is for this very reason that a detailed evaluation of treatment options is important. Ultimately the goal is to treat as many risks as possible with the limited resources available.
Risk treatment involves:
a detailed study of priorities
the range of options available for treating the risk
plan of action
implementation
Options for risk treatment
Avoid the activity that creates the risk
For example, the risk of children playing cricket on a hard concrete surface that is likely to cause injury. To prevent injury, this activity can be avoided by instructing the children to play on an oval instead. If the children are not in your control, the instruction may be in the form of appropriate signage. While this may not reduce the risk of injury to the children, it reduces your legal liability risks.
Regardless of the risks, some activities will have to proceed. It is therefore a matter of carefully formulating a plan of action that will ensure a reduction or elimination of the risks associated with these activities.
In trying to avoid a particular risk altogether the following should be seriously considered:
Are legitimate programs being affected by this decision?
By avoiding the risk are you simply ignoring a problem that exists?
Is it just a matter of deferring what is inevitable? For example, you are aware that the star pickets on some in ground sprinklers are hazardous. Instead of removing the risk, children are prevented from playing in the area. Some of the consequences may be that greater supervision is required to keep children from the area. All you are doing is delaying the inevitable because eventually something has to be done to rectify the problem.
Are you selecting a lower risk option and foregoing the potential benefit of undertaking an activity?
Accept or retain the risk
Some risks are worth taking. It is important, however, to determine if the organisation is in a position either legally or financially to carry the risks. This helps establish the threshold of what the organisation would deem an unacceptable exposure.
The organisation must have a good risk management strategy to manage all possible risks and have in place a sound management plan, which includes a financial plan to cater for risks that it chooses to retain.
Reduce the likelihood of an occurrence
Actions that can be taken to reduce or control risks include:
Regular inspections and facilities audits
Routine and preventive facilities maintenance programs
Supervision
Review of design
Adequate controls (e.g. install warning signs, erect safety barriers, cut down low hanging branches, install guards to heaters, place adequate soft fall materials beneath play equipment)
Involvement of all stakeholders in identifying risks
Reduce the exposure to risk
Have in place a good disaster recovery and business continuity management program
Instil a risk management culture into the organisation - make sure that there is commitment from the most senior to the most junior person
Widely publicise the importance of risk management
Insure or transfer the risk
Can the risk be transferred to another party and/or appropriately covered by an insurance facility? The choice of an option should be evaluated on a risk versus benefit basis. The cost of implementing an option should be balanced with the benefit that the option derives.
The figure below gives an indication of how the choice of options can be evaluated.
Plan of action and implementation
A plan of action should look at all risks rather than a single risk in isolation. It should detail:
the risks in order of priority
the options for treating the risk
the preferred option
the cost involved including the funding source (e.g. through the budget, fund raising etc)
other resources required
the results of cost-benefit analysis
the implementation plan including the person responsible for implementation and the timeline for implementation
anticipated results
reporting and monitoring the risk and treatment
The implementation of the treatment should be carried out by those best able to assess the risk and therefore best suited to minimise or eliminate the risk. If the job requires an expert, it is prudent to engage such an expert. Do not attempt to manage or control risk that you are not skilled to handle.
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http://www.cpaaustralia.com.au/cps/rde/xchg/cpa/hs.xsl/2742_3473_ENA_HTML.htm
