Methods, Tools, and Techniques: Adaptive Response Measures

Abstract

The evolution of risk management has placed some emphasis on the language of risk management practices. The classic categories risk control and risk financing, as umbrella terms for the range of risk management tools that may be employed, are still widely used – but as has been pointed out elsewhere in this book, the broadening of risk management has led to a reconsideration of the continuing accuracy and usefulness of the older terminology. For example, historically the term insurance-buying was expanded to include risk financing, which allowed recognition of newer, non-insurance tools. Similarly, loss prevention became risk control to include risk reduction, risk distribution, hedging, and more. More recently, risk treatment has emerged as a term that encompasses both the control and financing categories.

One of the significant changes in practice is the inclusion of opportunities that may arise from risks. Here the terminology has not quite kept pace with changes in the field. Additionally, while assessment and analysis has long captured the idea of evaluating risks and uncertainties, the more explicit inclusion of uncertainty, along with emergent phenomena, complexity, and the unknown/unknowable has led to questions about whether risk control meaningfully conveys the essence of these activities. The search for an alternative terminology is ongoing, but for the time being the term adaptive response (AR) is used here, which refers to a range of actions that could be taken to capture the full range of exposures.

Chapters Nine and Ten continue to use the term risk financing. This is more of a concession to practicality as, in any other setting, financial measures logically are ARs. Nevertheless, there are technical and substantive reasons to maintain some separation. But even here, the pressures of change are being felt. For example, while most risk financing arrangements focus on addressing the costs of risk (e.g. indemnifying an organisation for losses), the role of financial measures in encouraging or discouraging certain practices – including paying the risk manager’s salary, or incentivising certain desired practices – has historically not been considered in discussions

Citation

Young, P.C. (2022), "Methods, Tools, and Techniques: Adaptive Response Measures", Young, P.C., Grima, S. and Dalli Gonzi, R. (Ed.) Public Sector Leadership in Assessing and Addressing Risk (Emerald Studies in Finance, Insurance, and Risk Management), Emerald Publishing Limited, Leeds, pp. 145-162. https://doi.org/10.1108/978-1-80117-946-120221019