In accordance with George Silvanus who made an assertion that a people without History will repeat the mistakes of the Past. Thus; this becomes essential that for us to understand the exact risk mitigation insurance can be defined by, it is necessary we have a clear understanding as regards the concept. Risk mitigation can also be referred to be either risk management or Risk Cubing.
Over the years it has become of a much concern to many as per; which particular risk mitigation that we can possibly classify insurance to be part of it or under it? This is the question the article seeks to answer. Risk mitigation can be defined as taking steps to reduce adverse effects of a particular incidence. Risk mitigation can also be said to be the process of trying to reduce or control the adverse effects on a particular Person. However, there are four major types of Risk Mitigation and they are:
- Risk Acceptance
This does not really reduce any form of effects or reduce the risk effects, it has to do with the process of acceptance of the fact or assertion that risk exits and it can come up at any point in time. Since this type of risk does not reduce any effect, it is however referred to as a strategy because it is a common option when the cost of other risk management options such as avoidance or limitation may outweigh the cost of the risk itself.
- Risk Avoidance
This is a total opposite of risk acceptance because it voids and ensures the fact that there are no risk exposures. It is also worthy to note that this however has been regarded to be the most expensive of all due to the fact that it totally avoids risk of any kind.
- Risk Limitation
This is the exact kind of risk mitigation that most business firms as well as companies venture into because it ensures that there is a low level of risk found in their business or firms. It is a strategy employing a bit of risk acceptance along with a bit of risk avoidance or an average of both.
- Risk Transference
Risk transference has to do with the involvement of handing risk off to a willing third party. For example, numerous companies outsource certain operations such as customer service, payroll services, etc.
It has however been discovered that from research the risk mitigation by which most insurance firms prefer to go with is that of the average of which has to do with the risk limitation. In the risk limitation, they try to see how they can avoid the risk of a particular business or possibly reduce it. Though most of the researches has shown that insurance firms vary in different risk mitigation in accordance with the kind of insurance the firms are running or ventures into.