ACCA SBL Syllabus D. Risk - TARA - Notes ^{6 / 9}

TARA

There are four strategies for managing risk and these can be undertaken in sequence. It is sometimes called the TARA framework.

1. Transfer

   This means passing the risk on to another party which, in practice means an insurer or a business partner such as a supplier or a customer. This is done if the risk has a low likelihood but high impact on a business.

2. Avoid

   This means asking whether or not the organisation needs to engage in the activity where the risk is. This is done if the risk has a high likelihood and high impact on a business.

   If it is decided that the risk cannot be transferred nor avoided, it might be asked whether or not something can be done to reduce the risk.

3. Reduce

   This means diversifying the risk or re-engineering a process to bring about the reduction. This is done if the risk has a high likelihood but low impact on a business.

   It can also include Risk sharing.

   This involves finding a party that is willing to enter into a partnership so that the risks of a venture might be spread

4. Retain

   This means believing there to be no other feasible option. Such retention should be accepted when the risk and return characteristics are clearly known. This is done if the risk has a low likelihood and low impact on a business.