August 4, 2020 at 8:00 AM
Tolerate, terminate, treat and transfer — we look at the 4Ts of risk management.
We assume that tomorrow will look much like today. But as we’ve seen with Covid-19, that may not be the case. Changes may be profound. This is where good risk management comes in.
Risk management creates and protects organisational value. As such, it should be a natural and inherent part of what every company does. Risk management is an integral part of decision-making because it explicitly addresses uncertainty.
Risk is something uncertain. It may happen. It may not. But either way, it’s important because it will have an impact on objectives. These could be positive, negative or neutral. There are always several options for managing risk.
A good way to summarise the different responses is with the 4Ts of risk management: tolerate, terminate, treat and transfer.
Tolerate
Sometimes it’s okay to do nothing. The likelihood and impact of the risk is low. You may decide to simply retain the risk because it is acceptable without further actions. Log and monitor the risk because retaining a risk should always be an informed decision. You should not find that your organisation has retained a risk by default.
Terminate
Sometimes a risk is so far outside your risk appetite. Or is assessed as having such a severe impact on your business that you have stop (i.e. terminate) the activity causing it. For example, you may decide not to start or continue a business activity in a particular country. Or withdraw a product or service from market that gives rise to unacceptable risk.
Treat
You will almost certainly decide to take action on the most severe risks. You may act to reduce the likelihood of the risk occurring, or the severity of the consequences if it does. For example, install a firewall to reduce the likelihood of an external intrusion to your IT systems. And implement network segregation if an intruder does gain access.
Transfer
Insurance isn’t available for everything. Sometimes while it’s possible to transfer the activity to a third party, you still retain the liability if things go wrong. In the case of the payment card industry data security standards (PCI DSS), a third party arrangement outsources merely the function, not the responsibility or liability for PCI compliance.
To find out more
We’ll be tackling principles for managing risk and what is effective risk management in subsequent blogs. However in the meantime, for a free 30-minute consultation on your data security needs, e-mail [email protected] or complete your details on the contact form below.
FAQs
A good way to summarize the different responses to enterprise risks is with the 4Ts of risk management: tolerate, terminate, treat, and transfer.
What are the 4 T's of risk management strategy? ›
There are always several options for managing risk. A good way to summarise the different responses is with the 4Ts of risk management: tolerate, terminate, treat and transfer.
What are the 4 categories of risk management? ›
There are four main risk management strategies, or risk treatment options:
- Risk acceptance.
- Risk transference.
- Risk avoidance.
- Risk reduction.
Effective risk detection and management involve the Four T's Process (4 t risk management): Tolerate, Treat, Transfer, and Terminate. This complete risk mitigation strategy helps organizations handle various risk events by assessing the risks of impact and selecting appropriate control options.
What are the 4 P's of risk management? ›
The “4 Ps” model—Predict, Prevent, Prepare, and Protect—serves as a foundational framework for risk assessment and management. These industries operate within complex and hazardous environments, making proactive and thorough risk assessment essential.
What are the 4 risk management functions? ›
Risk Avoidance–eliminate the exposure completely. Risk Control–reduce chance or size of loss, or make the likelihood more certain. Risk Transfer–via insurance or contractual language. Risk Retention–decide to bear the risk at an acceptable level.
What are the 4 C's of risk management? ›
The 4 Cs of risk management – Culture, Competence, Control, and Communication – offer numerous benefits to organizations. Implementing these elements effectively can significantly enhance an organization's ability to manage risks and achieve its objectives.
What are the 4 A's of risk management? ›
thinking about IT's risk, and. focusing a dialogue with IT on the four A's (Availability, Access, Accuracy, Agility)
What are the 4 pillars of risk management? ›
The 4 Pillars of risk Management is an approach to the planning and delivery of risk management developed by Professor Hazel Kemshall at De Montfort University. The model is based on the four pillars of Supervision, Monitoring & Control, Interventions and Treatment and Victim Safety Planning.
What are the 4 factors of risk management? ›
What Are the Four Concepts of Risk Management?
- Taking Risk Into Account When Making Decisions. Potential risks must be taken into account, along with their potential impact on organizational objectives, when making strategic decisions. ...
- Strong Risk Management Culture. ...
- Risk Disclosure. ...
- Continuous Risk Management Improvement.
In the Aviation Instructors Handbook, the FAA outlines four principles of risk management worth considering.
- Accept no unnecessary risk. ...
- Make risk decisions at the appropriate level. ...
- Accept risks when the benefits outweigh the costs. ...
- Integrate risk management into planning at all levels.
Following the four T's of risk management—tolerate, terminate, treat, and transfer—is critical for enterprises.
What is the 4 step approach to risk management? ›
The four-step risk management process
Identify risks. Assess and measure risks. Apply controls. Monitor and review effectiveness.
What are the four risk management techniques? ›
There are four common ways to treat risks: risk avoidance, risk mitigation, risk acceptance, and risk transference, which we'll cover a bit later.
What are the four T's? ›
The T's are topic, task, target and text. And it's just a really simple way to synthesize a lot of our learning about how to design really tight Common Core aligned curriculum that is compelling for students and teachers. - There's skills that you use to get to understand the text.
