Risk Evaluation
PRINCIPLES, FACTORS AND IMPORTANCE TO RISK ASSESSMENT
Risk Evaluation
Process that is used to compare risk analysis results with risk criteria in order to determine
whether a specified level of risk is acceptable or tolerable
Risk evaluation matrix – management tool which accurately assess business exposure, based
on the frequency and severity of identified potential risks
Purpose: support decision evaluation involves comparing results of the risk analysis with the
established risk criteria to determine where additional action is required:
Do nothing further
Consider risk treatment options
Undertake further analysis to better understand the risk
Maintain existing controls
Reconsider objectives
Risk evaluation matrix
Management response could be risk retention, risk transfer, risk reduction, and risk avoidance
Risk retention – both frequency and severity of risk is low
Form of self-insurance, where business operator assumes and accept certain level of losses
Passive – retained without knowledge of occurrence or
Active – identified and decision made to retain and pay for any losses
Risk transfer – frequency of risk potential is low, but severity of incident is high
Most common and traditional approach to risk management is transferring responsibility to other
parties
Risk reduction – severity of potential risk remains low, but overall frequency of risk is increasing
business operators need to consider ways of reducing their exposure
Risk avoidance – frequency and severity risk potential are both high, business operators should
consider cancelling a program or activity
Study Questions
Why is there a need to evaluate a risk associated with a tourism attraction or activity?
What examples can be given for risk retention, risk transfer, risk reduction, and risk avoidance as
applied to tourism destinations?
How can you communicate to the organization the results of the evaluation?