Chapter 1 Flashcards
why is risk management important
it reduces the potential for a loss
gives SH’s confidence its being run properly
provides a disciplined approach to quantifying risk
what is compulsory for companies on the stock market in regards to risks
they must identify all significant risks and explain in a report how they are managed
definition of risk management
the identification, analysis and economic control of those risks which can threaten the assets or earning capacity of an entity
3 steps of managing risk
identification
analysis
control
two distinct aspects of controlling risk
physical controls - alarms
financial controls - wording of contracts
what is the BRE
building research establishment
what is the FPA
fire protection association
3 components of risk
uncertainty
level of risk
peril and hazard
how is risk usually assessed
consider the frequency and severity
example of speculative risks
betting
example of pure risks
no chance of a gain such as getting in a plane
what are fundamental risks
those that arise from social, economic, political or natural causes
4 features of insurable risks
a fortuitious event ( by change but not intention)
insurable interest (you have an interest in what you’re insuring)
not against public policy
risk is not a one off
what does homogeneous mean in terms of risks
insurers have seen risks similar before
3 primary functions of insurance
spreading risk
providing a degree of certainty
transferring risk
