Risk Acceptance: How & Why

Do you know that there are two ways of Accepting Risks.

What is even "Accepting Risks"?

It is about knowing that the risks may occur but you did not take any proactive or pre-emptive measure about them.

(For Threats/Negative Risks)

You decide not to:

• prevent it from occurring or?
• transfer it to a 3rd party or
• reduce the probability or the impact of both.

For Opportunities/Positive Risks

you decide not to:

• ensure it actually occurs or
• share with a 3rd party or
• enhance its probability of occurring or impact.

Some people refer to the positive terms of accepting risk as Rejecting Opportunity

In other words: let the risk occur if?it wants to occur!

Why Would You Even Accept Risk?

There are several reasons why you will decide to accept risks:

1. The Risk Score/Probability of occurrence/Impact is too low: well within your tolerance level and far beneath your threshold.
2. For threats, the cost of avoiding/transferring/mitigating the risk is very high even above the negative impact of the risk!
3. For opportunities, the cost of trying to ensure that the risk occurs or even increasing the probability of occurrence is higher than the profit you will gain from the opportunity!

(What other reasons might you decide to accept a risk?)

Ways of Accepting Risks:

Do you know that there are two ways of accepting risk?

1. Active Acceptance:

Here you accept that the risk will occur, and you will not take proactive actions to prevent it or enhance it, rather you plan for a reactive method of ameliorating the effect of the occurred risk (issue or problem). This is where Contingency Reserve comes in! For opportunities, it is quite looking much unrealistic, but you just deduct the amount from the reserve you are supposed to have: the reason why in calculating Contingency Reserve, you subtract opportunities and add threats.

2. Passive Acceptance:

For this type of acceptance, you take no reactive action at all when the risk occurs. Well, one case where it is logical to take this step is if you can easily absorb the consequences of the risk occurring without setting up a significant change to your project or organization!

Finally, you can actively or passively accept risks depending on if you can bear the impact, are willing to forgo the profit, mitigating the risks is not the best case or the risk score is negligible.

What are your thoughts?

What other reasons might you decide to accept a risk?

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