Sports Law • Risk Management

November 23, 2010: Risk Management Step 3: Control Risks

Once step two of the risk management process is complete as discussed in a previous blog, step three is to determine what to do to control risk. This is the step in which you can make affirmative decisions and take action to protect your assets. After you have identified risks in the previous steps, you must evaluate the likelihood that a risk will occur and the severity of potential harm that may result. Probability and severity may be determined by reviewing prior incident reports, litigation history, or brainstorming the possibilities. All this should be done looking at the history and business of your organization or another similar organization. Once the likelihood and severity are determined, then you can determine the best way to control the risk. There are four ways in which risk can be controlled: 1) retention, 2) transfer, 3) reduction, and 4) avoidance.

The first method of controlling risk is risk retention. If it is unlikely a risk will occur and if the severity of potential harm is relatively low, then it is an acceptable risk to keep, or retain. Sometimes, however, a risk cannot be transferred or reduced. Furthermore, it may be in conflict with your business plan to avoid the risk all together. Yet, it is best whenever possible to eliminate a risk as it is one less thing you will need to manage.

The second method of controlling risk is risk transfer. The most common ways to transfer risk is to hire independent contractors and to purchase insurance. Hiring independent contractors, such as hiring professional bus drivers to transport a team instead of using personal vehicles, are a great way to transfer risk associated with transporting your team to the bus company. Similarly, buying insurance transfers the risk of loss to the insurance company since the insurance company would have to cover for a particular loss instead of your organization taking a financial hit. This step in controlling risk should be considered as often as possible although it may be cost prohibitive.

The third method of controlling risk is risk reduction. You have a duty to prevent causing harm to others, so consider the ways in which you can reduce the possibility of harm to third parties. Some examples of reducing risk may include hiring extra staff, posting warning signs, training staff, and adhering to a maintenance schedule. You might have a legal duty to implement some of these risk reduction techniques so this is also an important step in controlling risk.

The fourth method of controlling risk is risk avoidance. You might want to avoid a risk that has high probability and high severity. This is the easiest way to protect your assets, but it may be in conflict with your business plan to eliminate a risk altogether. Thus, transferring or reducing risk might be good alternative options to control risk.

All of these methods are difficult and time consuming, but Nohr Sports is available to help. Nohr Sports specializes in helping you control the risks to your organization. Contact us today to find out how we can help you.