Fundamentals of Risk Management

Risk assessment
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FIgURE 
13.1
Loss control and the bow-tie
Risk source
Damage limitation
Impact
Loss prevention
Cost containment
Event
Loss prevention
Another way of looking at loss control activities is that loss prevention is about
reducing the likelihood of an adverse event occurring, although it will also be concerned 
with reducing the magnitude of an event that does occur. Damage limitation is
concerned with reducing the magnitude of the event when it does materialize. The 
contribution of damage limitation will be greatest if actions are planned that can be 
implemented as the event is actually taking place. Cost containment is concerned 
with reducing the impact and consequences of the event. Cost containment will be 
concerned with ensuring the lowest cost of repairs, as well as business continuity 
plans to ensure that the organization can continue operations following damage to 
the asset that has been affected.
Techniques for loss prevention will vary according to the type of hazard risk that 
is being considered. For health and safety risks, loss prevention is related to eliminat-
ing the activity completely or ensuring that, for example, hazardous chemicals are no 
longer used.
For risks to buildings, loss prevention techniques involve such controls as the 
elimination of sources of ignition and the control, containment and segregation of 
flammable or combustible materials. Loss prevention techniques will also include 
restrictions on smoking and other actions taken to reduce hazardous behaviours by 
persons using the buildings.
For fraud and theft risks, loss prevention techniques will include separation of 
responsibilities and security tagging of expensive items. Fraud prevention techniques 
may also involve pre-employment screening. A more detailed consideration of health 
and safety risks and fraud prevention is set out in Chapters 16 and 23.

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