Risk management is the identification, evaluation, and prioritization of risks , followed by the minimization, monitoring, and control of the impact or probability of those risks occurring.
71-652: Risks can come from various sources (i.e, threats ) including uncertainty in international markets , political instability , dangers of project failures (at any phase in design, development, production, or sustaining of life-cycles), legal liabilities , credit risk , accidents , natural causes and disasters , deliberate attack from an adversary, or events of uncertain or unpredictable root-cause . There are two types of events wiz. Risks and Opportunities. Negative events can be classified as risks while positive events are classified as opportunities. Risk management standards have been developed by various institutions, including
142-721: A fire , or a tornado ) or otherwise a circumstance, capability, action, or event ( incident is often used as a blanket term). A threat actor who is an individual or group that can perform the threat action, such as exploiting a vulnerability to actualise a negative impact. An exploit is a vulnerability that a threat actor used to cause an incident. A more comprehensive definition, tied to an Information assurance point of view, can be found in " Federal Information Processing Standards (FIPS) 200, Minimum Security Requirements for Federal Information and Information Systems " by NIST of United States of America National Information Assurance Glossary defines threat as: ENISA gives
213-704: A professional role , a risk manager will "oversee the organization's comprehensive insurance and risk management program, assessing and identifying risks that could impede the reputation, safety, security, or financial success of the organization", and then develop plans to minimize and / or mitigate any negative (financial) outcomes. Risk Analysts support the technical side of the organization's risk management approach: once risk data has been compiled and evaluated, analysts share their findings with their managers, who use those insights to decide among possible solutions. See also Chief Risk Officer , internal audit , and Financial risk management § Corporate finance . Risk
284-589: A property or business to avoid legal liability is one such example. Avoiding airplane flights for fear of hijacking . Avoidance may seem like the answer to all risks, but avoiding risks also means losing out on the potential gain that accepting (retaining) the risk may have allowed. Not entering a business to avoid the risk of loss also avoids the possibility of earning profits. Increasing risk regulation in hospitals has led to avoidance of treating higher risk conditions, in favor of patients presenting with lower risk. Risk reduction or "optimization" involves reducing
355-436: A threat is a potential negative action or event enabled by a vulnerability that results in an unwanted impact to a computer system or application. A threat can be either a negative " intentional " event (i.e. hacking: an individual cracker or a criminal organization) or an " accidental " negative event (e.g. the possibility of a computer malfunctioning, or the possibility of a natural disaster event such as an earthquake ,
426-413: A "transfer of risk." However, technically speaking, the buyer of the contract generally retains legal responsibility for the losses "transferred", meaning that insurance may be described more accurately as a post-event compensatory mechanism. For example, a personal injuries insurance policy does not transfer the risk of a car accident to the insurance company. The risk still lies with the policyholder namely
497-415: 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 . Modern software development methodologies reduce risk by developing and delivering software incrementally. Early methodologies suffered from
568-517: 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
639-507: A compromise to occur. It is a term used to distinguish them from threat agents/actors who are those who carry out the attack and who may be commissioned or persuaded by the threat source to knowingly or unknowingly carry out the attack. Threat action is an assault on system security. A complete security architecture deals with both intentional acts (i.e. attacks) and accidental events. Various kinds of threat actions are defined as subentries under "threat consequence". Threat analysis
710-484: A higher probability but lower loss, versus a risk with higher loss but lower probability. Opportunity cost represents a unique challenge for risk managers. It can be difficult to determine when to put resources toward risk management and when to use those resources elsewhere. Again, ideal risk management optimises resource usage (spending, manpower etc), and also minimizes the negative effects of risks. Opportunities first appear in academic research or management books in
781-512: A laptop. It is important to separate the concept of the event that a threat agent get in contact with the asset (even virtually, i.e. through the network) and the event that a threat agent act against the asset. OWASP collects a list of potential threat agents to prevent system designers, and programmers insert vulnerabilities in the software. Threat Agent = Capabilities + Intentions + Past Activities These individuals and groups can be classified as follows: Threat sources are those who wish
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#1732775756945852-465: A mean to get in touch with people in charge of system administration or even system security, inducing them to reveal sensitive information. One famous case is Robin Sage . The most widespread documentation on computer insecurity is about technical threats such as a computer virus , trojan and other malware , but a serious study to apply cost effective countermeasures can only be conducted following
923-492: A mnemonic, STRIDE , from the initials of threat groups: Microsoft previously rated the risk of security threats using five categories in a classification called DREAD: Risk assessment model . The model is considered obsolete by Microsoft. The categories were: The DREAD name comes from the initials of the five categories listed. The spread over a network of threats can lead to dangerous situations. In military and civil fields, threat level has been defined: for example INFOCON
994-405: A particular domain or context, with information on identified vulnerable assets, threats, risks, threat actors and observed trends. Project Management Body of Knowledge The Project Management Body of Knowledge ( PMBOK ) is a set of standard terminology and guidelines (a body of knowledge ) for project management . The body of knowledge evolves over time and is presented in A Guide to
1065-422: A proactive approach to security and prioritize their resources to address the most significant risks. Threat intelligence is the practice of collecting and analyzing information about potential and current threats to an organization. This information can include indicators of compromise, attack techniques, and threat actor profiles. By using threat intelligence, organizations can develop a better understanding of
1136-417: A rigorous IT risk analysis in the framework of an ISMS: a pure technical approach will let out the psychological attacks that are increasing threats. Threats can be classified according to their type and origin: Note that a threat type can have multiple origins. Recent trends in computer threats show an increase in ransomware attacks, supply chain attacks, and fileless malware. Ransomware attacks involve
1207-416: A schedule for control implementation and responsible persons for those actions. There are four basic steps of risk management plan, which are threat assessment, vulnerability assessment, impact assessment and risk mitigation strategy development. According to ISO/IEC 27001 , the stage immediately after completion of the risk assessment phase consists of preparing a Risk Treatment Plan, which should document
1278-459: A similar definition: The Open Group defines threat as: Factor analysis of information risk defines threat as: National Information Assurance Training and Education Center gives a more articulated definition of threat : The term "threat" relates to some other basic security terms as shown in the following diagram: [REDACTED] A resource (both physical or logical) can have one or more vulnerabilities that can be exploited by
1349-556: A threat agent in a threat action. The result can potentially compromise the confidentiality , integrity or availability properties of resources (potentially different than the vulnerable one) of the organization and others involved parties (customers, suppliers). The so-called CIA triad is the basis of information security . The attack can be active when it attempts to alter system resources or affect their operation: so it compromises Integrity or Availability. A " passive attack " attempts to learn or make use of information from
1420-476: Is ISO Guide 31073:2022 , "Risk management — Vocabulary". Ideally in risk management, a prioritization process is followed. Whereby the risks with the greatest loss (or impact) and the greatest probability of occurring are handled first. Risks with lower probability of occurrence and lower loss are handled in descending order. In practice the process of assessing overall risk can be tricky, and organisation has to balance resources used to mitigate between risks with
1491-480: Is a threat level used by the US. Leading antivirus software vendors publish global threat level on their websites. The term Threat Agent is used to indicate an individual or group that can manifest a threat. It is fundamental to identify who would want to exploit the assets of a company, and how they might use them against the company. Individuals within a threat population; Practically anyone and anything can, under
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#17327757569451562-427: Is a viable strategy for small risks where the cost of insuring against the risk would be greater over time than the total losses sustained. All risks that are not avoided or transferred are retained by default. This includes risks that are so large or catastrophic that either they cannot be insured against or the premiums would be infeasible. War is an example since most property and risks are not insured against war, so
1633-510: Is defined as the possibility that an event will occur that adversely affects the achievement of an objective. Uncertainty, therefore, is a key aspect of risk. Risk management appears in scientific and management literature since the 1920s. It became a formal science in the 1950s, when articles and books with "risk management" in the title also appear in library searches. Most of research was initially related to finance and insurance. One popular standard clarifying vocabulary used in risk management
1704-451: Is determining the rate of occurrence since statistical information is not available on all kinds of past incidents and is particularly scanty in the case of catastrophic events, simply because of their infrequency. Furthermore, evaluating the severity of the consequences (impact) is often quite difficult for intangible assets. Asset valuation is another question that needs to be addressed. Thus, best educated opinions and available statistics are
1775-531: Is known, the events that a source may trigger or the events that can lead to a problem can be investigated. For example: stakeholders withdrawing during a project may endanger funding of the project; confidential information may be stolen by employees even within a closed network; lightning striking an aircraft during takeoff may make all people on board immediate casualties. The chosen method of identifying risks may depend on culture, industry practice and compliance. The identification methods are formed by templates or
1846-796: Is meant to offer a general guide to manage most projects most of the time, there are currently three official extensions: The PMBOK is a widely accepted standard in project management, however there are alternatives to the PMBOK standard, and PMBOK does have its critics. One thrust of critique has come from the critical chain developers and followers (e.g. Eliyahu M. Goldratt and Lawrence P. Leach ), as opposed to critical path method adherents. The PMBOK Guide section on Project Time Management does indicate Critical Chain as an alternative method to Critical Path. A second strand of criticism originates in Lean Construction . This approach emphasises
1917-414: Is often used in place of risk-sharing in the mistaken belief that you can transfer a risk to a third party through insurance or outsourcing. In practice, if the insurance company or contractor go bankrupt or end up in court, the original risk is likely to still revert to the first party. As such, in the terminology of practitioners and scholars alike, the purchase of an insurance contract is often described as
1988-450: Is that it is the combination of the asset and type of action against the asset that determines the fundamental nature and degree of loss. Which action(s) a threat agent takes will be driven primarily by that agent's motive (e.g., financial gain, revenge, recreation, etc.) and the nature of the asset. For example, a threat agent bent on financial gain is less likely to destroy a critical server than they are to steal an easily pawned asset like
2059-446: Is the analysis of the probability of occurrences and consequences of damaging actions to a system. It is the basis of risk analysis . Threat modeling is a process that helps organizations identify and prioritize potential threats to their systems. It involves analyzing the system's architecture, identifying potential threats, and prioritizing them based on their impact and likelihood. By using threat modeling, organizations can develop
2130-482: Is therefore difficult or impossible to predict. A common error in risk assessment and management is to underestimate the wildness of risk, assuming risk to be mild when in fact it is wild, which must be avoided if risk assessment and management are to be valid and reliable, according to Mandelbrot. According to the standard ISO 31000 , "Risk management – Guidelines", the process of risk management consists of several steps as follows: This involves: After establishing
2201-481: The Information security management systems (ISMS), has been developed to manage, according to risk management principles, the countermeasures in order to accomplish to a security strategy set up following rules and regulations applicable in a country. Countermeasures are also called security controls; when applied to the transmission of information are named security services . The overall picture represents
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2272-568: The Institute of Electrical and Electronics Engineers (IEEE 1490–2011). The evolution of the PMBOK Guide is reflected in editions of the Guide. The PMBOK Guide is intended to be a "subset of the project management body of knowledge" that is generally recognized as a good practice. 'Generally recognized' means the knowledge and practices described are applicable to most projects most of
2343-692: The Project Management Institute , the National Institute of Standards and Technology , actuarial societies, and International Organization for Standardization . Methods, definitions and goals vary widely according to whether the risk management method is in the context of project management , security , engineering , industrial processes , financial portfolios , actuarial assessments , or public health and safety . Certain risk management standards have been criticized for having no measurable improvement on risk, whereas
2414-439: The risk factors of the risk scenario. The widespread of computer dependencies and the consequent raising of the consequence of a successful attack, led to a new term cyberwarfare . Nowadays the many real attacks exploit Psychology at least as much as technology. Phishing and Pretexting and other methods are called social engineering techniques. The Web 2.0 applications, specifically Social network services , can be
2485-1046: The 1990s. The first PMBoK Project Management Body of Knowledge draft of 1987 doesn't mention opportunities at all. Modern project management school recognize the importance of opportunities. Opportunities have been included in project management literature since the 1990s, e.g. in PMBoK, and became a significant part of project risk management in the years 2000s, when articles titled "opportunity management" also begin to appear in library searches. Opportunity management thus became an important part of risk management. Modern risk management theory deals with any type of external events, positive and negative. Positive risks are called opportunities . Similarly to risks, opportunities have specific mitigation strategies: exploit, share, enhance, ignore. In practice, risks are considered "usually negative". Risk-related research and practice focus significantly more on threats than on opportunities. This can lead to negative phenomena such as target fixation . For
2556-788: The 6th Edition of the PMBOK Guide now includes an "Agile Practice Guide" The PMBOK Guide is process-based, meaning it describes work as being accomplished by processes. This approach is consistent with other management standards such as ISO 9000 and the Software Engineering Institute 's CMMI . Processes overlap and interact throughout a project or its various phases. A Guide to the Project Management Body of Knowledge — Sixth Edition provides guidelines for managing individual projects and defines project management related concepts. It also describes
2627-550: The Project Management Body of Knowledge ( PMBOK Guide ), a book whose seventh edition was released in 2021. This document results from work overseen by the Project Management Institute (PMI), which offers the CAPM and PMP certifications. Much of the PMBOK Guide is unique to project management such as critical path method and work breakdown structure (WBS). The PMBOK Guide also overlaps with general management regarding planning, organising, staffing, executing and controlling
2698-483: The acceptance technique, the business intentionally assumes risks without financial protections in the hopes that possible gains will exceed prospective losses. The transfer approach shields the business from losses by shifting risks to a third party, frequently in exchange for a fee, while the third-party benefits from the project. By choosing not to participate in high-risk ventures, the avoidance strategy avoids losses but also loses out on possibilities. Last but not least,
2769-502: The appropriate level of management. For instance, a risk concerning the image of the organization should have top management decision behind it whereas IT management would have the authority to decide on computer virus risks. The risk management plan should propose applicable and effective security controls for managing the risks. For example, an observed high risk of computer viruses could be mitigated by acquiring and implementing antivirus software. A good risk management plan should contain
2840-474: The areas surrounding the improved traffic capacity. Over time, traffic thereby increases to fill available capacity. Turnpikes thereby need to be expanded in a seemingly endless cycles. There are many other engineering examples where expanded capacity (to do any function) is soon filled by increased demand. Since expansion comes at a cost, the resulting growth could become unsustainable without forecasting and management. The fundamental difficulty in risk assessment
2911-457: The case of an unlikely event, the probability of occurrence of which is unknown. Therefore, in the assessment process it is critical to make the best educated decisions in order to properly prioritize the implementation of the risk management plan . Even a short-term positive improvement can have long-term negative impacts. Take the "turnpike" example. A highway is widened to allow more traffic. More traffic capacity leads to greater development in
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2982-503: The confidence in estimates and decisions seems to increase. Strategies to manage threats (uncertainties with negative consequences) typically include avoiding the threat, reducing the negative effect or probability of the threat, transferring all or part of the threat to another party, and even retaining some or all of the potential or actual consequences of a particular threat. The opposite of these strategies can be used to respond to opportunities (uncertain future states with benefits). As
3053-428: 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. Briefly defined as "sharing with another party the burden of loss or the benefit of gain, from a risk, and the measures to reduce a risk." The term 'risk transfer'
3124-451: The context, the next step in the process of managing risk is to identify potential risks. Risks are about events that, when triggered, cause problems or benefits. Hence, risk identification can start with the source of problems and those of competitors (benefit), or with the problem's consequences. Some examples of risk sources are: stakeholders of a project, employees of a company or the weather over an airport. When either source or problem
3195-460: The customers of the enterprise, as well as external impacts on society, markets, or the environment. There are various defined frameworks here, where every probable risk can have a pre-formulated plan to deal with its possible consequences (to ensure contingency if the risk becomes a liability ). Managers thus analyze and monitor both the internal and external environment facing the enterprise, addressing business risk generally, and any impact on
3266-435: The decisions about how each of the identified risks should be handled. Mitigation of risks often means selection of security controls , which should be documented in a Statement of Applicability, which identifies which particular control objectives and controls from the standard have been selected, and why. Implementation follows all of the planned methods for mitigating the effect of the risks. Purchase insurance policies for
3337-434: The development of templates for identifying source, problem or event. Common risk identification methods are: Once risks have been identified, they must then be assessed as to their potential severity of impact (generally a negative impact, such as damage or loss) and to the probability of occurrence. These quantities can be either simple to measure, in the case of the value of a lost building, or impossible to know for sure in
3408-656: The encryption of a victim's files and a demand for payment to restore access. Supply chain attacks target the weakest links in a supply chain to gain access to high-value targets. Fileless malware attacks use techniques that allow malware to run in memory, making it difficult to detect. Below are the few common emerging threats:- ● Computer viruses ● Trojan horses ● Worms ● Rootkits ● Spyware ● Adware ● Ransomware ● Fileless malware Microsoft published
3479-410: The enterprise achieving its strategic goals . ERM thus overlaps various other disciplines - operational risk management , financial risk management etc. - but is differentiated by its strategic and long-term focus. ERM systems usually focus on safeguarding reputation, acknowledging its significant role in comprehensive risk management strategies. Threat (security) In computer security ,
3550-432: 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. For example,
3621-517: The findings of risk assessments in financial, market, or schedule terms. Robert Courtney Jr. (IBM, 1970) proposed a formula for presenting risks in financial terms. The Courtney formula was accepted as the official risk analysis method for the US governmental agencies. The formula proposes calculation of ALE (annualized loss expectancy) and compares the expected loss value to the security control implementation costs ( cost–benefit analysis ). Planning for risk management uses four essential techniques. Under
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#17327757569453692-414: The impact of the event equals risk magnitude." Risk mitigation measures are usually formulated according to one or more of the following major risk options, which are: Later research has shown that the financial benefits of risk management are less dependent on the formula used but are more dependent on the frequency and how risk assessment is performed. In business it is imperative to be able to present
3763-450: The loss attributed to war is retained by the insured. Also any amounts of potential loss (risk) over the amount insured is retained risk. This may also be acceptable if the chance of a very large loss is small or if the cost to insure for greater coverage amounts is so great that it would hinder the goals of the organization too much. Select appropriate controls or countermeasures to mitigate each risk. Risk mitigation needs to be approved by
3834-596: The most part, these methods consist of the following elements, performed, more or less, in the following order: The Risk management knowledge area, as defined by the Project Management Body of Knowledge PMBoK, consists of the following processes: The International Organization for Standardization (ISO) identifies the following principles for risk management: Benoit Mandelbrot distinguished between "mild" and "wild" risk and argued that risk assessment and management must be fundamentally different for
3905-575: The operations of an organisation. Other management disciplines which overlap with the PMBOK Guide include financial forecasting , organisational behaviour , management science , budgeting and other planning methods. Earlier versions of the PMBOK Guide were recognized as standards by the American National Standards Institute (ANSI) which assigns standards in the United States (ANSI/PMI 99-001-2008) and
3976-806: The organization or person making the risk management decisions. Another source, from the US Department of Defense (see link), Defense Acquisition University , calls these categories ACAT, for Avoid, Control, Accept, or Transfer. This use of the ACAT acronym is reminiscent of another ACAT (for Acquisition Category) used in US Defense industry procurements, in which Risk Management figures prominently in decision making and planning. Similarly to risks, opportunities have specific mitigation strategies: exploit, share, enhance, ignore. This includes not performing an activity that could present risk. Refusing to purchase
4047-400: The person who has been in the accident. The insurance policy simply provides that if an accident (the event) occurs involving the policyholder then some compensation may be payable to the policyholder that is commensurate with the suffering/damage. Methods of managing risk fall into multiple categories. Risk-retention pools are technically retaining the risk for the group, but spreading it over
4118-552: The potential for productivity loss resulting from a destroyed or stolen asset depends upon how critical that asset is to the organization's productivity. If a critical asset is simply illicitly accessed, there is no direct productivity loss. Similarly, the destruction of a highly sensitive asset that does not play a critical role in productivity would not directly result in a significant productivity loss. Yet that same asset, if disclosed, can result in significant loss of competitive advantage or reputation, and generate legal costs. The point
4189-508: The primary sources of information. Nevertheless, risk assessment should produce such information for senior executives of the organization that the primary risks are easy to understand and that the risk management decisions may be prioritized within overall company goals. Thus, there have been several theories and attempts to quantify risks. Numerous different risk formulae exist, but perhaps the most widely accepted formula for risk quantification is: "Rate (or probability) of occurrence multiplied by
4260-438: The project management life cycle and its related processes, as well as the project life cycle. and for the first time it includes an "Agile Practice Guide". The PMBOK as described in the Guide recognizes 49 processes that fall into five basic process groups and ten knowledge areas that are typical of most projects, most of the time. The five process groups are: The ten knowledge areas , each of which contains some or all of
4331-406: The project management processes, are: Each of the ten knowledge areas contains the processes that need to be accomplished within its discipline in order to achieve effective project management. Each of these processes also falls into one of the five process groups, creating a matrix structure such that every process can be related to one knowledge area and one process group. While the PMBOK Guide
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#17327757569454402-456: The reduction approach lowers risks by implementing strategies like insurance, which provides protection for a variety of asset classes and guarantees reimbursement in the event of losses. Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories: Ideal use of these risk control strategies may not be possible. Some of them may involve trade-offs that are not acceptable to
4473-438: The right circumstances, be a threat agent – the well-intentioned, but inept, computer operator who trashes a daily batch job by typing the wrong command, the regulator performing an audit, or the squirrel that chews through a data cable. Threat agents can take one or more of the following actions against an asset: Each of these actions affects different assets differently, which drives the degree and nature of loss. For example,
4544-413: The risks being faced. Risk analysis results and management plans should be updated periodically. There are two primary reasons for this: Enterprise risk management (ERM) defines risk as those possible events or circumstances that can have negative influences on the enterprise in question, where the impact can be on the very existence, the resources (human and capital), the products and services, or
4615-406: The risks that it has been decided to transferred to an insurer, avoid all risks that can be avoided without sacrificing the entity's goals, reduce others, and retain the rest. Initial risk management plans will never be perfect. Practice, experience, and actual loss results will necessitate changes in the plan and contribute information to allow possible different decisions to be made in dealing with
4686-447: The severity of the loss or the likelihood of the loss from occurring. For example, sprinklers 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. 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
4757-443: The system but does not affect system resources: so it compromises Confidentiality. OWASP (see figure) depicts the same phenomenon in slightly different terms: a threat agent through an attack vector exploits a weakness (vulnerability) of the system and the related security controls causing a technical impact on an IT resource (asset) connected to a business impact. A set of policies concerned with information security management,
4828-472: The threat landscape and improve their ability to detect and respond to threats. Threat consequence is a security violation that results from a threat action. Includes disclosure, deception, disruption, and usurpation. The following subentries describe four kinds of threat consequences, and also list and describe the kinds of threat actions that cause each consequence. Threat actions that are accidental events are marked by "*". A collection of threats in
4899-411: The time and there is a consensus about their value and usefulness. 'Good practice' means there is a general agreement that the application of the knowledge, skills, tools, and techniques can enhance the chance of success over many projects." This means that sometimes the "latest" project management trends, often promoted by consultants, may not be part of the latest version of The PMBOK Guide . However,
4970-425: The two types of risk. Mild risk follows normal or near-normal probability distributions , is subject to regression to the mean and the law of large numbers , and is therefore relatively predictable. Wild risk follows fat-tailed distributions , e.g., Pareto or power-law distributions , is subject to regression to the tail (infinite mean or variance, rendering the law of large numbers invalid or ineffective), and
5041-416: The whole group involves transfer among individual members of the group. This is different from traditional insurance, in that no premium is exchanged between members of the group upfront, but instead, losses are assessed to all members of the group. Risk retention involves accepting the loss, or benefit of gain, from a risk when the incident occurs. True self-insurance falls in this category. Risk retention
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