Which of the following will you put into box 3?

The risk matrix quadrant in Box 3 represents risks with both a high likelihood of occurring and a high impact if they do. According to established risk management principles, these are the most critical risks and require the most decisive action. The appropriate response is to Terminate (or Avoid) the risk, which involves ceasing the activities that give rise to the risk. This is because the potential for severe, frequent damage makes the risk unacceptable, and mitigation or transfer may not be sufficient to reduce it to an acceptable level.

A. transfer: This strategy is most appropriate for risks with low likelihood but high impact (Box 4), where the risk is shifted to a third party, such as through insurance.

B. treat: This strategy, which aims to reduce the likelihood or impact, is best suited for risks with high likelihood but low impact (Box 2).

C. tolerate: This strategy involves accepting the risk and is reserved for risks with both low likelihood and low impact (Box 1), where the cost of action outweighs the potential loss.

1. Chapman

R. J. (2011). Simple tools and techniques for enterprise risk management. John Wiley & Sons. In Chapter 6

"Risk Evaluation

" the author discusses the risk matrix and maps response strategies. For risks in the high-impact

high-likelihood quadrant

the primary response is identified as 'Avoid' (Terminate).

2. Hopkin

P. (2018). Fundamentals of risk management: understanding

evaluating and implementing effective risk management (5th ed.). Kogan Page Publishers. Chapter 11

"Risk treatment

" details the '4Ts' model. It explicitly states that for risks categorized as high impact and high likelihood

the appropriate response is avoidance (termination).

3. Waters

D. (2011). Supply chain risk management: vulnerability and resilience in logistics (2nd ed.). Kogan Page Publishers. In Chapter 7

"Managing supply chain risk

" the text explains that risks falling into the 'critical' zone (high likelihood/high impact) often require the activity to be terminated as the risk is too great to bear.