The activities associated with the identification, conceptual design and concept testing for solutions that will address the risk exceeding the Appetite.
Risk treatment options are classified in five distinct strategies:
- Avoidance A risk treatment strategy attempting to reduce the probability to 0 (zero) by avoiding policies, practices and processes that lead to occurrence of the risk event; Eliminate the risk completely. Examples include: Move a warehouse outside the risk area (earthquake, congestion), exit the market.
- Loss Prevention A risk treatment strategy attempting to minimize the losses by addressing the cause; Limit occurrence of risk events. Examples include: Increased security for high-theft items, supplier certification.
- Loss Reduction A risk treatment strategy attempting to reduce the losses resulting from the risk event; Limit the results per event. Examples include: Insurance, sprinkler installation.
- Isolation/Separation A risk treatment strategy attempting to contain a risk event in a single instance (market, product, supply chain, plant, warehouse); Contain the results.
- Duplication A risk treatment strategy attempting to limit the losses by establishing backup processes; Contain the risk event. Examples include: Information systems redundancy, overflow warehouses, emergency protocols for natural disasters, dual-sourcing strategy.
- Diversification A risk treatment strategy attempting to spread the risk over many; Limit the impact of risk events on the bottom line. Examples include: Omni-channel, industry diversification.
OpenReference recommends adoption of ISO 31000 processes to build Supply Chain Risk Management governance processes, systems and behaviors. G3 provides the processes to describe an enterprise's SCRM processes. ISO 31000 is copyright ISO.
Compare to: ISO 31000:2009:5.5 Risk Treatment.
|G3||Manage Supply Chain Risk||2||G3|