1 / 13

Topic 5. Risk Management and Risk Management Process

Topic 5. Risk Management and Risk Management Process. Bus 200 Introduction to Risk Management and Insurance Jin Park. Overview. Risk Management Risk Management process. Risk Management. Risk management A systematic process for managing (pure) risks faced by an individual or organization.

reyna
Download Presentation

Topic 5. Risk Management and Risk Management Process

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Topic 5. Risk Management and Risk Management Process Bus 200 Introduction to Risk Management and Insurance Jin Park

  2. Overview • Risk Management • Risk Management process

  3. Risk Management • Risk management • A systematic process for managing (pure) risks faced by an individual or organization. • Pre-loss risk management • Should prepare for potential loss in the economical way possible • Post-loss risk management • Survival of the organization • Continuation of operation • Stability of earnings

  4. Risk Management Process • Identify risks or exposures to loss • Evaluate risks or exposures to loss • Identify and select risk management techniques • Implement and monitor

  5. Organization Property Liability Business income Death or disability of key persons Job-related injuries or disease Fraud, dishonesty, crime International operation Individual Property Liability Premature death or disability Unemployment Sickness Identify Risks

  6. Identify Risks • Physical inspection • Questionnaire • Financial statement analysis • Flowchart • Contract analysis • Statistical analysis of past losses • Risk management information system (RMIS)

  7. Evaluate Risks • Risk management matrix • Frequency • Severity High Frequency Low Low High Severity

  8. Identify and select RM techniques • Risk avoidance • Risk retention (Risk assumption) • Risk reduction (control) • Loss prevention – frequency • Loss reduction – severity • Risk transfer • Insurance • Non-insurance • Example: sprinkler system, hold-harmless agreement, ignorance, safety education, smoke alarm, deductible, warm-up, rent, fire drill, top salaries for key employees, good housekeeping

  9. Evaluate Risks • Risk mapping 50% Frequency 1% $1 Mil $1 Severity

  10. Identify and select RM techniques • Risk mapping • Risk Map • A graphical presentation of potential frequencies and severities of identified loss exposures faced by individual/organization • Critical issue tolerance boundary or risk-tolerance boundary • Prioritize risks

  11. Implement and Monitor • Are techniques implemented correct? • If not, …

  12. Advantages Uncertainty is reduced Insurers can provide. their expertise such as loss control services. Insurance premium is tax-deductible. Insurance proceeds are tax-free. Disadvantages Insurance premium may be a major cost. Moral and morale hazards may be created. Time and effort have to be spent. Insurance may not be renewed. Insurance

  13. Others • CAT bonds • Forward/Future • Swaps • Options • Securitizations • CDO, CMO

More Related