![]() If the cost of other risk responses exceeds the value that would be gained, a risk acceptance strategy may be appropriate. Risk owners acknowledge the risk exists but "accept" the risk with minimal response. ![]() Simply put, risk acceptance is a status quo risk response. At times mitigation may be overused when other risk response types are better.Īccept Risk acceptance is used when other risk response options are unavailable or not optimal. Mitigation tends to be the risk response internal auditors most frequently recommend as a course of action related to an audit observation. Mitigation involves creating controls - or improving existing controls - to close a control design or execution gap. Mitigate When risk management practices break down, new risks emerge, or risk profiles shift, mitigation often is an appropriate risk management strategy. based company that wishes to expand in a Latin American market). A share or transfer risk response can be a good option when the other party has specific risk management competencies, such as familiarity in a particular geographical market (e.g., a U.S. This may be done by purchasing insurance policies or by forming business arrangements, such as joint ventures or other partnerships. Share/Transfer Sometimes organizations choose to share or transfer risk with/to another party. A good example of avoidance would be to completely disengage from a market due to geopolitical instability in a region of the world. ![]() There are four common risk response types: avoid, share or transfer, mitigate, and accept.Īvoid In some circumstances, the risk is so significant that management will decide to avoid the risk entirely. Internal auditors can serve as thought partners with management when assessing the best risk response for a given issue. Such factors include impact, likelihood, speed of onset, and duration. Choosing the appropriate response depends on four things: the nature of individual risks, an organization’s ability to exploit or absorb risk outcomes, associated opportunities and threats, and factors that influence risk outcomes.
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