"Responsibilities and accountabilities of the person handling risks need to be identified and assigned." Explain the ways of handling the different types of risk existing in the business.

The ownership of risk should be allocated. Responsibilities and accountabilities of the person handling risks need to be identified and assigned. The person concerned when the risk arises, should document it and report it to the higher ups in order to have the early measures to get it minimized. Risk may be handled in the following ways: 1) Risk Avoidance: Risk Avoidance means to avoid taking high risk project or choosing of less risky business/ project. For example, one may avoid investing in stock market due to price volatility in stock prices and may prefer to invest in debt instruments. 2) Risk Retention/Absorption: The enterprise handles the unavoidable risk internally and the firm bears/absorbs it due to the fact that either insurance cannot be purchased of such type of risk or it may be too expensive to cover the risk and much more cost-effective to handle the risk internally. Usually, retained risks occur with greater frequency, but have a lower severity. An insurance deductible is a common example of risk retention to save money, since a deductible is a limited risk that can save money on insurance premiums for larger benefit. There are two types of retention methods for containing losses as under: Active Risk Retention: Where the risk is retained as part of deliberate management strategy after conscious evaluation of possible losses and causes. Passive Risk Retention: Where risk retention occurred through negligence. Such type of retaining risk is unknown or because the risk taker either does not know the risk or considers it a lesser risk than it actually is. 3) Risk Reduction: In many ways physical risk reduction (or loss prevention, as it is often called) is the best way of dealing with any risk situation and usually it is possible to take steps to reduce the probability of loss. The ideal time to think of risk reduction measures is at the planning stage of any new project when considerable improvement can be achieved at little or no extra cost. The cautionary note regarding risk reduction is that, as far as possible expenditure should be related to potential future savings in losses and other risk costs; in other words, risk prevention generally should be evaluated in the same way as other investment projects. 4) Risk Transfer: This refers to legal assignment of cost of certain potential losses to another. The insurance of 'risks' is to occupy an important place, as it deals with those risks that could be transferred to an organization that specialises in accepting them, at a price. Usually, there are 3 major means of loss transfer viz., By Tort, By contract other than insurance, By contract of insurance. The main method of risk transfer is insurance. The value of the insurance lies in the financial security that a firm can obtain by transferring to an insurer, in return for a premium, the risk of losses arising from the occurrence of a specified peril. Thus, insurance substitutes certainty for uncertainty. Insurance does not protect a firm against all perils but it offers restoration, at least in part of any resultant economic loss.