The main basic types of risk response strategies include risk assumption, risk avoidance, risk transfer, risk transformation, risk hedging, risk compensation, and risk control.

Risk avoidance refers to an enterprise avoiding, stopping, or withdrawing from business activities or environments that contain a certain risk, to avoid becoming the owner of the risk.

Risk assumption, also known as risk retention or risk self-retention, refers to an enterprise adopting an accepting attitude towards the risks it faces, thereby bearing the consequences brought by the risk.

Risk compensation refers to an enterprise taking appropriate measures to compensate for potential losses caused by risks.

Risk transfer refers to an enterprise transferring risk to a third party through a contract, where the enterprise no longer owns the transferred risk.

Risk control refers to controlling the causes, environment, conditions, etc., of risk events, to achieve the goal of mitigating losses when risk events occur or reducing the probability of risk events occurring.

Risk transformation refers to an enterprise transforming the risks it faces into another risk through strategic adjustments and other means.

Risk hedging refers to taking various measures, introducing multiple risk factors or undertaking multiple risks, so that these risks can offset each other, meaning their impacts cancel each other out.

Characteristics of Risk Management

I. Strategic:

1. Mainly applied at the enterprise strategic management level.

2. Integrating and managing enterprise-level risks from a strategic perspective is where the value of comprehensive risk management lies.

II. Company-wide participation

1. Comprehensive risk management is a process involving the enterprise's governance body, management, and all employees, managing all enterprise risks with the aim of keeping risks within the risk appetite and enhancing enterprise value (full participation, controllable risks, increased value).

2. Enterprise risk management itself is not an outcome, but a means to achieve outcomes.

III. Professionalism

Requires risk management professionals to implement specialized management.

IV. Duality

1. The business mission of comprehensive enterprise risk management lies in:

(1) Loss minimization management (when risk losses cannot be avoided, minimize losses as much as possible).

(2) Uncertainty management (when risk losses may or may not occur, strive to reduce the likelihood of risk occurrence).

(3) Performance optimization management (when risks indicate opportunities, transform risks into opportunities to enhance enterprise value).

2. Comprehensive risk management must manage both pure risks and opportunity risks.

V. Systemic

Comprehensive risk management must have a systematic and standardized set of methods, establish and improve a comprehensive risk management system, including risk management strategies, risk financial measures, an organizational functional system for risk management, a risk management information system, and an internal control system, thereby providing reasonable assurance for achieving the overall objectives of risk management.

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