The Most Appropriate Options for Treating Risks - Essay Example

The paper "The Most Appropriate Options for Treating Risks" is an outstanding example of a business essay. Risk Avoidance is the process of eliminating activities, exposures and hazards that have been deemed negative and can affect the processes in an organization. That is, it encompasses the set activities created by managers to avoid compromising events of an organization entirely.

Describe each of the following approaches to risk treatment and give one hypothetical example of their use

Risk Modification

This is a comprehensive plan laid out by organisations or managers that are intended to check or avert the severity of risks, hazards or challenges that organistions would have undertaken. The intention of these processes is to minimize the impact of risks on a given operation of business activity.

Consequence control

As already noted, businesses have inherent risks that have different consequences or effects on the operations of business activities. For instance, poor supply management is a risk associated with failure to mitigate key performance indicators. On that note, consequence control is the process of mitigating, minimizing or managing the impact of risks to the operations of businesses.

Accepting the Risk

The processes of accepting risks are tied to the understanding of risk management approaches in business operations. In that regard, accepting risk takes place in an organization when the cost of managing a given risk can be accepted, since the risk entailed may not be sufficient to warrant the additional cost that is needed to avoid the risk in question.

Hypothetical Example of their use

In the year 2003 one of the world's dairy food leaders, Parmalat group collapsed and entered into bankruptcy and this happened after management realized that billions of Euros were missing from the Company’s accounts. In such a case, risk avoidance would have been attained had the Parmalat group decided to create a channel where shareholders carried their oversight role in monitoring the Company’s progress. Risk modification on the other hand was the case where Parmalat group’s management structure was quite tight sealing loopholes that previously created risk. This way, the severity of risks was minimized. Thirdly, with regard to consequence control, the company the legal actions were extended to the bank officials who assisted the company to issue bonds and loans and investigation further established that the City group and Deutsche Bank were being pursued in relation to this fraud case. On the part of accepting risk, Parmalat had to use various wholly-owned entities among which included Bonlat in the Cayman Island subsidiary---which existed during the five final years and the holder of the Bank of America's false account.