Editing Risk management (section)

====Risk reduction====
Risk reduction or "optimization" involves reducing the severity of the loss or the likelihood of the loss from occurring. For example, [[Fire sprinkler|sprinkler]]s are designed to put out a [[fire]] to reduce the risk of loss by fire.  This method may cause a greater loss by water damage and therefore may not be suitable. [[Halomethane|Halon]] fire suppression systems may mitigate that risk, but the cost may be prohibitive as a [[strategy]].

Acknowledging that risks can be positive or negative, optimizing risks means finding a balance between negative risk and the benefit of the operation or activity; and between risk reduction and effort applied. By effectively applying [[Health, Safety and Environment]] (HSE) management standards, organizations can achieve tolerable levels of [[residual risk]].<ref>[https://www.iadc.org/ebookstore/ebook-iadc-hse-case-guidelines-for-mobile-offshore-drilling-units/ IADC HSE Case Guidelines for Mobile Offshore Drilling Units] {{Webarchive|url=https://web.archive.org/web/20170503072112/http://www.iadc.org/ebookstore/ebook-iadc-hse-case-guidelines-for-mobile-offshore-drilling-units/ |date=2017-05-03 }} 3.2, section 4.7</ref>

Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from the fact that they only delivered software in the final phase of development; any problems encountered in earlier phases meant costly rework and often jeopardized the whole project. By developing in iterations, software projects can limit effort wasted to a single iteration.

[[Outsourcing]] could be an example of risk sharing strategy if the outsourcer can demonstrate higher capability at managing or reducing risks.<ref>{{cite journal|last=Roehrig|first=P|year=2006|url=http://www.btquarterly.com/?mc=bet-governance&page=ss-viewresearch|title=Bet On Governance To Manage Outsourcing Risk|journal=Business Trends Quarterly|access-date=2007-09-07|archive-date=2018-09-01|archive-url=https://web.archive.org/web/20180901182553/http://www.btquarterly.com/?mc=bet-governance&page=ss-viewresearch|url-status=dead}}</ref> For example, a company may outsource only its software development, the manufacturing of hard goods, or customer support needs to another company, while handling the business management itself. This way, the company can concentrate more on business development without having to worry as much about the manufacturing process, managing the development team, or finding a physical location for a center. Also, implanting controls can also be an option in reducing risk. Controls that either detect causes of unwanted events prior to the consequences occurring during use of the product, or detection of the root causes of unwanted failures that the team can then avoid. Controls may focus on management or decision-making processes. All these may help to make better decisions concerning risk.<ref>{{Cite journal |last1=Shashi |last2=Centobelli |first2=Piera |last3=Cerchione |first3=Roberto |last4=Ertz |first4=Myriam |title=Managing supply chain resilience to pursue business and environmental strategies |url=https://onlinelibrary.wiley.com/doi/10.1002/bse.2428 |journal=Business Strategy and the Environment |year=2020 |language=en |volume=29 |issue=3 |pages=1215–1246 |doi=10.1002/bse.2428 |bibcode=2020BSEnv..29.1215S |s2cid=213432044 |issn=0964-4733}}</ref>