Doctor Accounting : Chapter 29 in Collaboration with SAA Global Education

Coming back to Risk.
Do you know how Company respond to Risk?

Watch Dr Accounting chapter 29 to learn more about the world of Accounting with us!

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Video Transcript

Hi all. Today I am going to share with you about risk. Do you know how company respond to risk?

There is a model which is called the TARA model. The TARA model has two dimensions. The dimension is Consequences and Likelihood. I’d like to share with you and demonstrate how this model works.

So if it is low consequences and low likelihood, the company will accept the risk, example will be Inherent Risk. Every business will have inherent risk. If it is high consequences and low likelihood, you will transfer your risk, example of transfer the risk will be via Hedging or you Insured the incident or risk.

Okay now, if it is high likelihood and low consequences, the company will reduce the risk, for example through internal control. High likelihood and high conquences, the company will avoid, that means that they will try to get rid of the business. This is a simple illustration of how TARA works, I hope you find this segment useful. Thank you.