2. Risk management techniques
– Insurance is only one of the methods by which individuals may seek to manage
their risks
– some of the methods of risk management are:
risk
avoidance
risk
retention
risk
reduction
and
risk
financing
3. 1. Risk avoidance:
Controlling risk by avoiding a loss situation is known as risk avoidance
for example; one may not venture outside the house for fear of meeting with
an accident or may not travel at all for fear of falling ill when abroad.
2. Risk retention:
In which one tries to manage the impact of risk and decides to bear the risk
in its effects by oneself
for example; a business house may decide based on experience about its
capacity to bear small losses up to a certain limit to retain the risk with
itself.
4. 3. Risk Reduction:
which is a more practical and relevant approach than risk avoidance it
means taking steps to lower the chance of occurrence of a loss and or to
reduce severity of its impact if such loss should occur the measures to reduce
chance of occurrence are known as loss prevention the measures to reduce
agree of loss are called as loss reduction
4. Risk financing:
which refers to the provision of funds to meet losses that may occur this
covers the following two ways first risk retention through self financing
which involves self payment for any losses as they occur second risk transfer
which involves transferring the responsibility for losses to another party
now that we have covered the various types of risk management techniques
