Fundamentals of Risk Management

tolerate, treat, transfer and terminate
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After a period of growth, the organization should be achieving a high reward for
a reduced risk. This represents the phase where the organization will exploit oppor-
tunities until competitors arrive. This is a mature operation. All mature operations 
are exposed to the possibility of decline, although many organizations choose to exist 
in a mature, declining market, where risk exposure is low and so are potential rewards.
The application of the 4Es to the management of strategic, opportunity or speculative 
risks is consistent with the description of risk and reward offered by Figure 2.2. However, 
pursuing opportunity risks and the development of strategic objectives are the most
important issues for many organizations. Risk management input into strategic decision 
making may not always be as robust and well structured as the risk management input 
into operations and projects.
The allocation of the dominant types of responses and controls to each of the four 
quadrants shown in Figure 15.2 is similar to the allocation of the 4Ts using hazard 
risk management. Existing in a mature or declining market is similar to accepting 
uncertainty in tactics and tolerating hazard risks. Exploring opportunities is similar 
to looking at the options for treating hazard risks. It is in the area of exploiting
opportunities and exiting opportunities where differences in approach between the 
management of hazards and uncertainties compared with the management of oppor-
tunities becomes most evident.
Figure 15.3 shows a refinement to Figure 15.2 in that the area of high risk and
potentially high reward is evaluated in a little more detail by taking account of risk 
FIgURE 
15.2
Risk versus reward in strategy
Potential
reward
Level of risk
Exploit
opportunity until
competitors arrive