Risks are prioritised in accordance with their degree which has an impact in achieving organisational targets. They are divided into five bands: catastrophe, major, medium, moderate and minor risks.
A risk map enables separating losses into four categories: HH: High Frequency High Severity, LH: Low Frequency High Severity, HL: High Frequency Low Severity, LL: Low Frequency Low Severity
Risk management involves risk control and risk financing.
Risk control process involves analysis of the loss potential, implementation of prevention methods and, very importantly, training and motivation of staff.
The primary objective of risk financing is to spread the cost of risks more evenly over a period of time, in order to reduce the financial strain and possible insolvency, which the random occurrence of large losses may cause. The secondary objective is to minimise risk costs.
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