ABSTRACT
There are numerous books that deal with risk analysis but far fewer that deal adequately with risk treatment. And the few books dealing with risk treatment tend to focus on a very narrow set of possibilities (i.e. derivatives and insurance contracts) with a general assumption that risk ought to be reduced. But risk-taking is perfectly acceptable provided that risk is understood and within appetite. In general, there are six broad options as follows: increase, retain, avoid, reduce likelihood, mitigate impact, transfer.
These days risk is handled in a far more holistic fashion, and the focus is much more on adaptive responses to risk that rely on operational flexibility and financial flexibility. Often the best risk treatment involves exercising real options within the business context rather than purchasing a financial option from a bank.
The risk treatment stage is more complex than it first appears because treatments can introduce new risks and adverse consequences to be managed. There are usually multiple potential treatments that may be considered, all varying in their effectiveness and cost.
