Risk Management 1

1. Risk Management 1 • What is Risk Management? • the corporate function of choosing intelligently among all of the options for treating or handling the consequences of risk

2. What Really Matters?

3. Steps in the Pre-loss risk management process 1. Identify 2. Measure 3. Decide how to handle 4. Implement and review • * The number of steps depends on how you break the steps apart.

4. What to identify: pure losses direct indirect personnel operations How to identify balance sheet income statement other records checklists questionnaires 1) Identify

5. 2) measure • maximum possible loss • maximum probable loss • relative frequency

6. 3) decide how to handle • Alternate handling techniques • Deciding which ones to use • How does loss Control come into play? • What is self – insurance? • What is a captive insurance company

7. 4) implement • regularly review • update process

8. Alternative methods for handling or dealing with risk • A ---- Avoid • R ---- Retain • T ---- Transfer • insurance • non-insurance

9. Selecting the Risk ManagementTechnique Frequency High Low assume loss prevention loss reduction loss Prevention loss reduction assume Severity Low insure transfer loss reduction loss prevention avoid loss prevention loss reduction High

10. Loss controlTo attack hazards • reduce frequency and / or reduce severity • loss prevention targets frequency • loss reduction targets severity

11. Self-insurance • What is self-insurance? • Why do companies self-insure? • save money • better control • loss prevention incentives • improved claims settlement • profitability and investment earnings • Difference between self-insurance and assumption

12. Captive insurance companies • a method of self-insuring • is a company formed to write insurance for a parent company • Motives for starting a captive • save the overhead and profits of the insurance company • earn investment income on the premium • tax advantages