Risk control is the process by which an organization reduces the likelihood of a risk event occurring or mitigates the effects that risk should it occur. Our preferred way to determine your risk control strategy is to use the four T's Process:
Transferring Risk can be achieved through the use of various forms of insurance, or the payment to third parties who are prepared to take the risk on behalf of the organization Tolerating Risk is where no action is taken to mitigate or reduce a risk. This may be because the cost of instituting risk reduction or mitigation activity is not cost-effective or the risks of impact are at so low that they are deemed acceptable to the business (such as some trivial annoyance). Even when these risks are tolerated they should be monitored because future changes may make it no longer tolerable.
Treating Risk is a method of controlling risk through actions that reduce the likelihood of the risk occurring or minimize its impact prior to its occurrence. Also, there are contingent measures that can be developed to reduce the impact of an event once it has occurred.
Terminating Risk is the simplest and most often ignored method of dealing with risk. It is the ap-proach that should be most favored where possible and simply involves risk elimination. This can be done by altering an inherently risky process or practice to remove the risk. The same can be used when reviewing practices and processes in all areas of the business.
If an item presents a risk and can be changed or removed without it materially affecting the busi-ness, then removing the risk should be the first option considered; rather than attempting the treat, tolerate or transfer it.

Detailed Explanation:Dual or multiple sourcing introduces competition, reducing the sole supplier's bargaining power and leading to cost reductions. Framework agreements (A) or economies of scale (D) may not address the immediate need to reduce rates. Reference: CIPS Level 4, Sourcing Strategies.

Functional benchmarking is a comparison to similar or identical practices (e.g., the picking process for assembling customer orders, maintaining inventory controls of spare computer parts, logistics to move operational forces, etc.) within the same or similar functions outside the immediate industry. Functional benchmarking might identify practices that are superior in your functional areas in whatever industry they may exist. Functional benchmarking would be accomplished at the federal level by comparing the IRS collections process against those of American Express. Comparing copper mining techniques to coal mining techniques is an example in the private sector.
Benefits
- Provides industry trend information
- Quantitative comparisons
- Better improvement rate
Challenges
- Diverse corporate cultures
- Great need for specificity
- Not invented here. syndrome
- Common functions can be difficult to find
- Takes more time than internal or percent
- Must be able to visualize how to adapt the best practices
Source: USN Benchmarking Handbook
LO 1, AC 1.3

Detailed Explanation:Zero-based budgeting emphasizes starting from scratch and justifying all expenses.
* 3 (Budget flexibility): Ensures resources are allocated dynamically based on needs.
* 4 (Focus on operational issues): Encourages alignment with operational priorities rather than historical trends.Using prior figures (1) is contrary to zero-based budgeting principles. Reference: CIPS Level 4, Financial Planning and Budgeting.

Detailed Explanation:
* A (Purchase value): A competitive bidding process is only justifiable when the cost of running it is outweighed by its potential value.
* B (Qualified suppliers): Ensuring a sufficient number of capable suppliers promotes competition and delivers better results.Restricting suppliers (C) or rigid timeframes (D) can hinder the process, while subcontracting (E) is not a core consideration in most bids. Reference: CIPS Level 4, Bidding and Tendering.