Controllable risk is a risk within an organization that can be managed or avoided by action. It is the risk that can be reduced by the organization’s own decisions and activities. Controllable risks can be managed and minimized with proper planning, the right resources and effective implementation.
Controllable risk can be managed and minimized through proper planning, the right resources and effective implementation. By understanding the controllable risks and taking action to address them, organizations can reduce their risk and better protect their bottom line.
Example of Controllable risk
The following is an example of a controllable risk: Supply Chain Risk: This type of risk is associated with the supply chain of the organization. This can be managed by ensuring timely delivery of products and services, developing reliable relationships with suppliers, and introducing appropriate risk management systems.
In summary, controllable risk is a risk within an organization that can be managed or avoided by action. It is important for organizations to identify and manage controllable risks in order to reduce their risk and better protect their bottom line. Examples of common controllable risks include human, financial and operational risks, as well as supply chain risk.
Types of Controllable risk
The three main types of controllable risk are human, financial, and operational.
- Human Risk: This risk is associated with the action or inaction of individuals or groups in the organization. This can be managed by providing proper training, creating effective communication systems, and introducing proper policies and procedures.
- Financial Risk: This type of risk is associated with the financial decisions of the organization. This can be managed by creating effective financial plans, developing appropriate financial controls, and monitoring financial risks.
- Operational Risk: This type of risk is associated with the operational activities of the organization. This can be managed by developing proper operational procedures, creating effective quality control systems, and introducing appropriate risk management systems.
Steps of managing controllable risk
- Identify the Risk: The first step in managing controllable risk is to identify the risk. This can be done by conducting a risk assessment to identify the potential risks that the organization may face.
- Analyze the Risk: Once the risk has been identified, the organization should analyze the risk to determine the severity and likelihood of the risk. This can be done through a risk analysis process that involves collecting information and data, evaluating the risk, and developing a risk management strategy.
- Mitigate the Risk: After the risk has been identified and analyzed, the organization should take steps to mitigate the risk. This can include creating a risk management plan, implementing controls and procedures to address the risk, and developing strategies to reduce or eliminate the risk.
By understanding and managing controllable risks, organizations can reduce their risk and better protect their bottom line. With proper planning, the right resources and effective implementation, organizations can successfully manage and minimize their controllable risks.
Advantages of Controllable risk
- Cost Savings: By managing and minimizing controllable risks, organizations can reduce their costs and improve their bottom line.
- Improved Efficiency: By managing and minimizing controllable risks, organizations can improve their efficiency and increase their productivity.
- Improved Performance: By managing and minimizing controllable risks, organizations can improve their performance and achieve their goals.
Limitations of Controllable risk
Despite their advantages, controllable risks have some limitations. These include:
- Difficulty in measuring the impact of the risk: It can be difficult to determine the exact impact of a controllable risk on the organization.
- Difficulty in predicting the outcome: It can be difficult to predict the outcome of a controllable risk due to the complexity of the risk environment.
- The risk of failure: There is always a risk of failure when attempting to control a risk.
- Risk Mitigation: Risk mitigation is the process of reducing the probability and/or severity of a risk. This can be done by implementing measures such as implementing safety procedures, developing insurance policies, and establishing contingency plans.
- Risk Transfer: Risk transfer is the process of transferring the risk from one party to another. This can be done through contracts, insurance policies, or other financial instruments.
- Risk Retention: Risk retention is the process of accepting the risk and dealing with it directly. This can be done through self-insurance, investing in risk management practices, or establishing reserves.
Controllable risk can be managed through various approaches such as risk mitigation, risk transfer, and risk retention. By understanding the controllable risks and taking appropriate steps to address them, organizations can reduce their risk and better protect their bottom line.
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