What is Risk Management?

Introduction

Why Manage Risks?

There are many reasons for managing risk. Here are some:

  • Saves resources: people, income, property, assets, time
  • Protects public image
  • Protects people from harm
  • Prevents/reduces legal liability
  • Protects the environment
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How Does Insurance Work

Insurance is a mystery to many people. Simply put, an insurance company pools the money of a large group and promises that if one of the group suffers a predefined loss, then the pool will pay for the loss.

Business owners and individuals trade off the affordable cost of insurance for the peace of mind that a large loss won’t mean financial ruin.

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Factors Affecting Insurance Premiums

Factors Affecting Insurance Premiums

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What is Risk Management?

Everyone knows what a risk is; we use the word everyday and we take risks regularly, whether we realize it or not. In every decision you make, when assessing the pros and cons, you are also doing a risk assessment. The challenge is to make it a more conscious process where your business is concerned.

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The Risk Management Process

  1. Identify Potential Exposures To Loss
  2. Measure Frequency and Severity
  3. Examine Alternatives
  4. Decide Which Alternatives To Use
  5. Implement The Chosen Techniques
  6. Monitor Results
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Steps to implement risk management:

Risk Map
  1. Risk Identification [more]
  2.  

  3. Quantify and Prioritize [more]
  4.  

  5. Be risk sensitive, not risk adverse [more]
  6.  

  7. Identify risk in business decisions [more]
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All information contained in this text is from Craig Rowe’s book Insurance Premiums Are Killing My Business! Controlling Insurance and Claims Costs for Small to Mid-Sized Business (2003).

Risk Management Tips

  1. Keep Old Policies and Certificates [more]
  1. Insure to Value [more]
  1. ACV vs. Replacement Cost [more]
  1. Spend Money and Time on Loss Control [more]
  1. Protect Your Image [more]
  1. Don’t Hide Your Strengths From Your Insurer [more]
  1. Risk Management Attitudes [more]
  1. Cooperate Fully with Insurers/Brokers/Adjusters [more]
  1. Loyalty vs. Shopping Around [more]
  1. Insurance Renewals [more]
  1. Handling Accidents and Losses [more]
  1. Choosing Your Deductible [more]

All information contained in this text is from Craig Rowe’s book Insurance Premiums Are Killing My Business! Controlling Insurance and Claims Costs for Small to Mid-Sized Business (2003).

 

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References

¹ World could face severe economic downturn, new UN report suggests. (May 15, 2008). Retrieved February 6, 2009, from http://www.un.org/apps/news/story.asp?NewsID=26686&Cr=desa&Cr1

² Survey: P/C Premiums Decline Again as Industry Enters 'Uncertain Times'. (October 27, 2008). Retrieved February 6, 2009, from http://www.insurancejournal.com/news/national/2008/10/27/94986.htm

³ Financial Crisis Intensifies Interest In Risk Management Among CFOs. (September, 2008). Retrieved February 6, 2009, from http://www.towersperrin.com/tp/showdctmdoc.jsp?country=global&url=Master_Brand_2/USA/News/Spotlights/2008/Sept/2008_09_30_spotlight_cfo_survey.htm