Avoiding risk with risk management

High School ・Business ・MLA ・4 Sources

Avoiding risks is described as removal of all elements of danger and actions that have a bad effect on an organization or its properties. It is simply preventing events that can completely threaten proper performance (Goetsch & Davis, 2014). It is almost impossible to prevent every risk, strategies in avoiding risks are designed deflect as many threats as possible to prevent costly and business endangering effects that the damaging occurrences cause. It requires policies, training, education and proper technology in avoiding business risks. Structuring Effective Business Contracts Another method organizations can employ in reducing risks the use of effective business contracts. A business contract is a legally binding agreement made in Avoiding risks is described as removal of all elements of danger and actions that have a bad effect on an organization or its properties in writing between two or more parties and thus must be carefully created and reviewed. Informal agreement done verbally may cause problems especially if one of the parties fails to abide to the agreements. Therefore, it is importance for the company to opt for signed contracts which can be produced in case problems arise. To reduce risks via this method the organization must ensure that the agreements it signs with other parties gives a description of all obligations expected to be fulfilled and the ones it expects others to fulfil (Goetsch & Davis, 2014). The agreement should limit any liabilities and set parameters especially the time frame for the contract terms. In addition, it must set all terms of rental, lease, or sale as well as establish clear the risks and responsibilities of all parties involved. This will help in reducing the cases related to breach of contract or making of unnecessary alterations by either party in the contract. Overall, risks of lawsuits, loss of money and other resources are minimized.

Avoiding Lawsuits on Business Torts

Cases of business lawsuits on torts are common and affect its performance a lot. Planning and being ready in case the organization is sued can help since a quick response can make a big difference in the outcome of a lawsuit case. The company must protect itself against lawsuits by structuring and running business activities in the best way possible (Garfield, 2016). This can be achieved by having some backup such as good relationship with the business lawyer and having an insurance cover. The company should structure the business in a way that shields it from personal liabilities such as registering it as a corporation or a limited liability company. Other measures include well-laid procedures and policies such as employee handbooks, having corporate compliance programs to enable employees know their roles, and ensuring continuous education for the workers (Garfield, 2016). The business lawyer services and advice is very important and the company should work with its lawyer to indentify risks and try to control them. The legal team may have great knowledge about the business and can offer a quick response to the impending trouble. Investing in legal matters will be of great benefit for the organization as it will help in identifying possible issues and deal with them on time.

Minimizing Product Liability Risks

Product liability can result in case there is some compromise for the quality of the product produced such as their design, distributors, retailers, and the wholesalers. Some of the steps the company should use include applying for insurance cover against exposures. It can take the general or product liability in which the policies can help defend the organization against lawsuits for bodily harm or the property damage caused by the product. Product liability insurance entails lawsuits by customers who suffer harm by using the products or services. Other ways the organization should apply to minimize product liability risks include ensuring use of large and visible warning labels, reviewing instructions for accuracy, cleaning and inspecting equipment regularly as well as inspection of the stock for any defects. In addition, creation of an additional tracking system from the factory to the store and checking recalls and removing the items immediately can greatly help. In case there are reports of injuries caused by the product the management may need to do a thorough investigation and take actions that can help reduce the impact immediately (Reason, 2016). For instance, it should issue an acknowledgement notice, inform the retailers carrying the affected product, and develop a plan of fixing the problem.

Avoiding Employee Lawsuits

Employers may be unaware of the actions that can make their workers sue them for damages. For the organization to be less susceptible to employee lawsuits the company must be up-to-date with the state and federal laws affecting their operations. Some of the types of workplace lawsuits identified include personal injury in which a member of staff sues the company. The employer is blamed for negligence for not providing a safe environment for every work. The company will need to have an insurance cover for workers compensation, which will prevent an employee from claiming excess compensation (Reason, 2016). The company will also need to offer a quick response in case such a problem occurs and also monitor potential safety hazards. Other measures include adequate training for employees on workplace safety and follow safety guidelines provided for all businesses. The company can also be sued for overtime and the management needs understanding of the Fair Labor Standards Act especially for the non-salaried and hourly employees. The organization must avoid discrimination of any nature such as gender, color, race, disability, and religion among others in addition to ensuring diversity of workforce. Others such as state-law protected classes such as marital status must be understood to enable the organization to provide a good working environment. Harassment in form of bullying in the workplace can lead to law suits by the employees and the company will develop an employee handbook to ensure people do not violate rules. The other notable problems to be considered include wrongful termination and the company will need accurate and detailed records that show employee performance, discipline, communications, and other relations. These can help it defend against termination lawsuits by proving whether it was legal or not.

Understanding the Risks of Business Financing

Financial risks include market risks, liquidity risk, operational, and credit risks. Good risk management is recommended for businesses and organizations. Risk reduction is very important since it helps in saving costs on resources that may be required in case risks occur. This may require understanding the type of risks expected and their possible solutions. For instance, market risks come about due to changes in the specific marketplace in which the business competes (Gras & Mendoza-Abarca, 2014). For instance, traditional retailers are experiencing low sales due increased desire by consumers to shop online. The organization must keep up with the modern trends of marketing to avoid experiencing low sales. The organization must also understand credit risks, which occur when it owes its suppliers or many customers owe it. It can be suffered if the company decides to default payments and this can be solved by the organization ensuring that it has sufficient cash flow for paying its debts and having reliable credit officers to facilitate recovery of debts from customers (Gras & Mendoza-Abarca, 2014). Liquidity risk can be classified as asset liquidity and operational funding liquidity risk referring to the easiness of converting assets to cash or its daily cash respectively. The organization will need to practice proper cash flow management to ensure that it avoids this kind of risk. Operational risks occur from the daily operations of the company and may include lawsuits, personnel issues, fraud, and business model risks. Understanding the risks and ways to address them is vital to the company’s management.


Risk avoidance is important since it enables measures that help in avoiding occurrence of compromising events, which can threaten the performance of an organization. It entails proper evaluation using the available information to come up with strategies that help in reducing the possibility of risk occurrence. Some of the risk reduction strategies include structuring of effective business contracts, avoidance of lawsuits in business torts, minimizing product liability risks, and avoidance of employee lawsuits. Understanding the risks of business financing can also help an organization to reduce the chances of risk occurrence.


Garfield, A. (2016). Business Torts. NY Practice Guide: Business and Commercial, 3.

Goetsch, D. L., & Davis, S. B. (2014). Quality Management for Organizational Excellence. Upper Saddle River, NJ: Pearson.

Gras, D., & Mendoza-Abarca, K. I. (2014). Risky business? The Survival Implications of Exploiting Commercial Opportunities by Nonprofits. Journal of Business Venturing, 29(3), 392-404.

Reason, J. (2016). Managing the Risks of Organizational Accidents. Routledge.

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