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The Concept of Risk

This document discusses the concept of risk, including defining risk, measuring risk through probability theory and psychology, and different types of risks such as personal, property, liability, and others. It also covers managing risks through identification, evaluation, and various methods like prevention, reduction, shifting, accepting, and spreading risks. The objectives of risk management are to protect employees, control costs, utilize resources effectively, and maintain good community relations.

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Hassan Salama
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37 views14 pages

The Concept of Risk

This document discusses the concept of risk, including defining risk, measuring risk through probability theory and psychology, and different types of risks such as personal, property, liability, and others. It also covers managing risks through identification, evaluation, and various methods like prevention, reduction, shifting, accepting, and spreading risks. The objectives of risk management are to protect employees, control costs, utilize resources effectively, and maintain good community relations.

Uploaded by

Hassan Salama
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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THE CONCEPT OF RISK

Introduction to risk Nature of risk Types of risk Risk Management Risk evaluation and abatement

Defining Risk Uncertainty and certainty

Measuring risk
Probability Theory Psychological Aspects of risk Severity and Frequency Chance

The Nature of Risk


Pure and speculative risk

Fundamental and particular risk


Personal Risks Property Risks

Liability Risks
Risk arising from failure on part of others Fidelity Risks

Risks

due to ownership Transport vehicle

and

use

of

We can look at risks in the following manner also

Personal Property Liability Loss due to others failure Fidelity risks Risk due to ownership or use of transport vehicle

Personal Risks
Premature death (Dying too early) Dependent old age (Dying too late) Sickness or disability (Resulting in loss of income and

earning power, involving additional expenses and extra needs) Unemployment (Loss of income may be temporary/permanent, but routine living expenses continue. Fixed liabilities like loan repayments have still to be paid , hence further multiplying the difficulties )

Property Risks

Loss/damage to property

Loss of use of property Additional expenses occasioned by the loss of property


Liability Risks They arise out of human mistakes often termed as civil wrongs committed by a person resulting in injury and/or death to another person, and/or loss of or damage to property.

Risk arising from failure on part of others Risk arising due to failure on part of another person to meet a specified obligation, e.g. guarantee bonds and sureties.

Fidelity Risks: Risks arising due to dishonesty of employees and others in course of performance of their duties causing loss of money and stocks to the owner .

Risks due to ownership and use of Transport vehicle : Use of transport vehicles opens scope for two types of risks
1 Own damage or loss to the vehicle due to a variety of pure risks including negligence 2 Death/injury to third parties and loss/damage to their property.

Management of Risks
Definition Management of risks is concerned with direction of purposeful activities towards the achievement of individual or organizational goals. Risk Management may be defined as the identification, analysis and economic control of those risks which can threaten, the assets or earning capacity of an enterprise. Risk management evaluates which risks identified in the risk assessment process require management and selects and implements the plans or actions that are required to ensure that those risks are controlled.

Features of Risk Management


To create the right corporate policies and strategy. To management men and machines (processes) effectively. To evaluate the risks confronted by a business. To effectively handle, spread , monitor and insure the risks . To introduce various plans and techniques to minimize the risks. To give advices and suggestions for handling the risks. To create risk awareness among the people. To avoid cost, disruption and unhappiness relating to risks. To decide which risks are worth taking/pursuing, and which should be shunned. To fix the sum assured under the policy and to decide on whether to insure or not. To select the appropriate technique or method to manage the risks.

Objectives of Risk Management


Protecting employees from accidents that might

result in death or injury Due attention given to cost of handling risks.


Effective utilization of resources. Maintaining good relations with society and

public.

Risk Identification
The various methods of risk identification are

Preparing Checklist of risks or various losses which may

arise due to risks On-site Inspections and risk assessment


Financial Statement analysis

Flowchart preparation and identification of risky activities Interaction with employees for their views about risk

exposures of business based on their knowledge and experience Statistical records of occurrence of losses related to various categories of risks

Scope of Risk Management

Control of Loss

Financing of Loss

Internal Risk Control

Extra Precautions

Risk Retention and Self Insurance Buy Insurance Policies Contracts

Diversification

Reduced Level of Risky Activities

Investment In risk information

Non-Insurance Risk Transfers

Risk Management Organization


DIRECTOR -RISK MANAGEMENT

Risk Management Analyst

Insurance Manager

Safety, Health and Loss Prevention Manager

Claims Manager

Security Manager Supervisor Security(s)

Insurance Administrator

Insurance Clerk(s)

Supervisor Safety

Supervisor Fire Protection

Claims Administrator

Supervisor Industrial Hygiene

Methods of Handling Risks


Prevention/ avoidance of Risks
Reduction of Risks Shifting or transferring of Risks

Accepting/resuming Risks
Spreading Risks

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