Question

determine and list the organisation's risk acceptability factors of a business

Answer 1

In risk management, risk acceptance is a legitimate and important option. However, risk acceptance does not mitigate a risk (as the effect of the risk is not reduced). Sometimes firms and businesses accept risk due to certain reasons. For instance, the cost associated with limiting or avoiding the risk may be more than the costs associated with accepting the risk. Therefore, when the benefit is more than the cost, a firm will accept the risks. The cost of accepting a risk may be quite low or even none at the beginning unless a disruption occurs. Other organizations may simply not afford to mitigate, avoid or transfer the risk, and hence they accept the risk by default.

Also, risk acceptance is contingent on the prevailing and other situations. Therefore risk acceptance is never universal or obsolete. Some of the risk acceptance criteria include:

a. Avoiding all risks that can be avoided.
b. Reducing risks wherever and whenever possible.
c. Containing the effects of risks.
d. Ensuring that further developments do not cause risk incrementation.

Some of the risk acceptability factors for a business are:
1. Familiarity or unfamiliarity of a risk.
2. The origins of risk (natural, financial, technological or any other).
3. Experience of the company in handling the risk.
4. Ethics involved in accepting the risk.
5. Regulations and laws involved and their stringency.
6. The reliability of information regarding risk.
7. Perspectives on safety and security including individual (safety of the employee), financial, economic, social and other securities.
8. The openness, reliability and/or capability of the risk management process.
9. Benefits associated with taking or accepting the risks.
10. The degree to which the risk can be controlled
11. The time that will pass until the effects of the risks are experienced.
12. The time that has passed since the risk is existing.

Some principles are also used in risk acceptance and evaluation. For instance, the ALARA (as low as reasonably achievable) principle is used in cost-benefit analysis. Hence the acceptance of risk may be by following the principles applied.