Risk Control
Key takeaways
- Risk control is a set of practices that identify, evaluate, and reduce threats to an organization’s objectives and assets.
- It draws on risk assessments and is a core element of enterprise risk management (ERM).
- Common risk-control techniques include avoidance, loss prevention, loss reduction, separation, duplication, and diversification.
- Tools such as a Risk and Control Matrix (RACM) help map risks to controls, evaluate effectiveness, and guide improvement.
What is risk control?
Risk control comprises the methods and actions organizations use to limit the likelihood or impact of adverse events. It starts with identifying potential risks across operations, finance, technology, people, and the external environment, then applies targeted measures to prevent, mitigate, or contain losses.
How risk control works
Risk control is a proactive, plan-driven process that helps organizations prepare for and respond to hazards that could disrupt operations or objectives. Techniques are typically used in combination and adjusted over time as business conditions change.
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Common techniques:
- Avoidance
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Eliminate exposure by not engaging in the risky activity (e.g., switching to a safer chemical in manufacturing). Avoidance is ideal but not always feasible.
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Loss prevention
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Accept the risk but reduce the chance it occurs (e.g., security patrols, cameras, or purchasing insurance).
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Loss reduction
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Limit damage if a risk materializes (e.g., sprinkler systems to reduce fire damage).
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Separation
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Spread assets or operations to limit single-point catastrophic loss (e.g., multiple production sites).
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Duplication
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Create backups or redundant systems to sustain operations after a failure (e.g., backup servers, mirrored databases).
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Diversification
- Spread business exposure across products, markets, or suppliers so a setback in one area doesn’t endanger the whole enterprise (e.g., multiple sourcing regions).
No single technique eliminates all risk; effective programs blend methods and evolve with the organization.
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Risk and Control Matrix (RACM)
A RACM is a structured tool that links identified risks to the controls intended to mitigate them. Typical components include:
* Risk identification (categorized by process or function)
Risk assessment (likelihood and impact)
Control measures (policies, procedures, systems)
Control effectiveness (testing, compliance, design adequacy)
Action plans (remediation or enhancement steps)
Benefits: clarifies control coverage, highlights gaps or weak controls, prioritizes remediation, and supports data-driven decisions.
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Practical examples
- Sumitomo Electric — After major earthquake disruption, the company refined business continuity plans, training, and drills to improve resilience and response, illustrating continual improvement after a shock exceeded initial assumptions.
- BP (Deepwater Horizon) — The 2010 spill led to strengthened safety culture, advanced monitoring, enhanced training and standards, and greater transparency as part of an expanded risk-control approach.
- Starbucks — Uses diversified sourcing, sustainability standards (e.g., supplier audits), and real-time supply-chain monitoring to reduce supply disruption and reputational risk.
These cases show that risk control is iterative: organizations learn from incidents, strengthen controls, and adapt governance and culture.
Identifying emerging risks
Emerging risks are often novel or fast-changing. Effective detection strategies include:
* Monitoring industry trends, news, and research
Scenario planning and stress testing for plausible futures
Applying big data and AI to spot patterns and anomalies
Encouraging open internal reporting and cross-functional discussion
Assigning a dedicated risk-monitoring team or function
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FAQs
Q: How does risk control differ from risk management?
A: Risk management is the broader process of identifying, assessing, and prioritizing risks. Risk control is the subset focused on implementing techniques to mitigate or eliminate those risks.
Q: Can risk control eliminate all risks?
A: No. Risk control reduces the probability and impact of risks but cannot remove them entirely. Some risks are inherent or unforeseeable, so the goal is resilience rather than total elimination.
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Q: How does risk control relate to corporate social responsibility (CSR)?
A: Risk control and CSR overlap when controls protect stakeholders, the environment, and reputation. Ethical, sustainable practices often reduce regulatory, legal, and reputational risks while supporting long-term value.
Bottom line
Risk control is an essential, ongoing function that helps organizations anticipate, limit, and respond to threats. By combining multiple control techniques, using tools like RACMs, and continuously monitoring emerging risks, companies can reduce exposure, enhance resilience, and protect long-term value.