Risk and Insurance Management Society (RIMS) Certified Risk Management Professional (CRMP) Practice Exam

What does the concept of 'risk treatment' include?

1. Identifying potential risks

2. Prioritizing risk responses

3. Avoiding all risks

4. Designing actions to mitigate risks

The correct answer is: Designing actions to mitigate risks

The concept of 'risk treatment' encompasses designing actions to mitigate risks effectively. This process involves assessing the various risks identified and determining appropriate strategies to manage them. Risk treatment aims to minimize the potential negative impacts of those risks on an organization. This can include implementing specific measures such as risk avoidance, risk reduction, risk transfer, or risk acceptance, depending on the nature and severity of the risk. The effectiveness of any risk treatment strategy is evaluated based on its ability to reduce the likelihood of occurrence or impact of the risk. In contrast, identifying potential risks and prioritizing risk responses are crucial steps in the overall risk management process leading up to the treatment phase but do not themselves constitute treatment. Additionally, while avoiding all risks might seem like a straightforward approach, it is seldom practical or achievable since risk is an inherent aspect of any business or operational activity. Thus, designing actions to mitigate risks is the definitive element of risk treatment.