Control Of Risk Flashcards
What are the 6 general classes of risk?
The 6 general classes of risk are: Economic Legal Political Social Physical Juridical
What is risk?
Risk is defined as uncertainty that may be either positive or negative arising out of a given set of circumstances.
What is risk management?
Risk management is the process of managing uncertainty of exposures that affect an organization’s assets and financial statements using five steps: identification, analysis, control, financing, and administration.
What are the 5 steps of the risk management process?
The 5 steps of the risk management process are:
Identification
Analysis
Control
Financing
Administration or implementation and monitoring
What is total cost of risk?
Total cost of risk is the sum of all costs and expenses associated with the risk management function of an organization. Total cost of risk (TCOR) is insurance costs + retained losses + risk management departmental costs + outside services fees + quantified indirect cost.
What is severity?
Severity is the dollar amount of a given loss or the aggregate dollar amount of all losses for a given period.
What are expected losses?
Expected losses are the projected frequency or severity of losses based on loss history, probability distributions, and statistics; the expected loss projection is commonly called a “loss pick”
What is Frequency?
Frequency is the number of losses occurring in a given time period.
Define an Economic Risk.
An Economic Risk is a risk arising from operations, economy, financial marketplace, or entrepreneurial activities
What is a Legal Risk?
A Legal Risk is a risk inherent in compliance or arising from statutory liability.
What is a Political Risk?
A Political Risk is a risk arising from changes in the law, government reinterpretations, changes in government policy or changes in the political environment.
What is social risk?
Social risk is a risk arising from public relations, loss of reputation, damage to brand, cultural issues, social direction or social media.
What is a Physical risk?
A physical risk is a risk arising from property, people, or information.
What is a Juridical risk?
A Juridical Risk is a risk arising from a jury or judge’s decision or from court or jury attitudes.
What is an exposure?
Exposure-a situation, practice, or condition that may lead to an adverse financial consequence; an activity or resource; people and assets
What is a peril?
Peril is the cause of a loss
Explain Risk Identification.
Risk identification is the most important step of risk management. It is the process of identifying and examining exposures of an organization.
Explain Risk Analysis.
Risk Analysis is the assessment of the potential impact of various exposures on an organization.
What is Risk Control?
Risk Control is any conscious action or inaction to minimize, at the optimal cost, the probability, frequency, severity, or unpredictability of loss.
What is Risk Financing?
Risk Financing is the acquisition of internal and external funds to pay losses at the most favorable cost.
What is Risk Administration?
Risk Administration is the implementation and monitoring of the risk management process.
What is a hazard?
A hazard is a condition or circumstance that may give rise to a loss from a given peril; physical, moral, or morale characteristics thatake the likelihood of a loss from a given peril greater
What is an incident?
An incident is an event that disrupts normal activities and may become a loss, claim or business interruption
What is an accident?
An accident is an unplanned event definite as to time and place that results in injury or damage to a person or property
List the 5 components of Total Cost of Risk
5 Components of Total Cost of Risk:
- Insurance Costs
- Retained Losses
- Risk management departmental costs
- Outside services fees
- Indirect Costs
What are the 6 uses of total cost of risk as key risk management tools?
6 key risk management tools of total cost of risk:
- Assist with making effective risk management decisions.
- Measure progress toward risk management objectives.
- Focus and promote safety and loss control.
- Provide management and employee incentives.
- Assist with accurate pricing of products and services.
- Assist with effective management of financial budgets.
What is Risk Control?
Risk control is any conscious action or inaction to minimize, at optimal cost, the probability, frequency, severity, or unpredictability of loss.
What are the 3 roles of risk control in the risk management process?
The 3 roles of risk control:
- Identification of Exposures
- Incident analysis
- Cost-benefit analysis
What are the five primary types of risk control techniques?
the 5 primary Risk Control Techniques:
- Prevention
- Avoidance
- Reduction (pre and post loss)
- Transfer (contractual, physical, or both)
- Segregation/separation/duplication
What are the four types of contractual transfer?
Four types of contractual transfer are:
- Hold harmless or indemnification agreements
- Exculpatory agreement or clause
- Waiver of subrogation
- Limit of liability or liquidated damages clause
Explain the three classifications of hold harmless agreements.
3 classifications of hold harmless agreements:
- Limited (mine)- assumes responsibility for indemnitee’s liability for indemnitor’s negligence only.
- Intermediate form ( mine and ours)- Limited + responsibility for full idemnification of the indenitee if there is any negligence on the indemnitor’s part or if the indemnitor is partially negligent, they pay 100%
- Broad (yours, mine, and ours)- Limited + Intermediate + indemitor agrees to be responsible for indemnitee’s sole negligence.
What are the three approaches to loss control?
three approaches to loss control:
- Financial Approach
- Systems Approach
- Practical Approach
What are the requirements of the administration of risk control programs?
administration requirements of risk control are:
- Requires acquisition and allocation of resources
- Requires consideration of alternative treatments and their relative costs and benefits.
- Requires effective communication throughout the organization and with third parties
What is an occurrence?
An occurrence is an accident with the limitation of time removed (an “accident” that is extended over a period of time rather than a single observable happening)
What is a loss?
A loss is a reduction in value
What is a claim?
A claim is a demand or obligation for payment as a result of a loss
What are the root causes of accidents and injuries?
The 3 root causes of accidents and injuries:
- unsafe acts or behaviors
- Unsafe conditions
- Uncontrollable events
What are the 6 basic steps of accident prevention?
6 accident prevention steps:
- Elimination of hazard
- Substitution of a less hazard
- Engineering controls
- Administrative controls
- Personal protective equipment
- Training
What are the 8 elements of a safety and health program?
8 elements of a safety and health program:
- Management leadership
- Accountability, responsibility, and authority
- Employee participation
- Hazard assessment and control
- Employee information and training
- Accident reporting, investigation and analysis
- Post-injury management
- Evaluation of program effectiveness
What are the key property exposures?
COPE: Construction Occupancy Protection Exposure
What are the property hazard controls?
Property Hazard Controls; Management programs Fire protection service Automatic sprinkler system Fire alarm system Security protection
What are the types of fleet risks?
Types of Fleets: Cargo transportation Service/delivery Private passenger Non-owned use
What are the hazard controls related to fleet operations?
Hazard Controls for fleets: Management policy statement Driver qualification Disciplinary procedures Driver training Response to accidents Vehicle inspection and maintenance program Monitoring and surveillance
What are the walking surface hazard controls and examples of each?
Walking surface hazard controls with examples:
Surface materials- example entrance mats for rain/snow
Spill control- immediate clean-up
Surface continuity- repair cracks
Illumination and visibility- paint on a curb
Stair design- handrails
Maintenance and inspection- planned replacement
Other engineering controls- slip resistant footwear
What are ergonomics?
Ergonomics is the applied science of equipment and workplace design intended to maximize productivity by reducing operator fatigue and discomfort. Fitting the work environment to the person rather than expecting the person to adapt to the physical work environment.
What are the general ergonomic risk factors?
General ergonomic risk factors: Repetitive tasks Excessive Force Awkward or deviated posture including reaching Static loading Personal risk factors Environmental risk factors
Computer workstations contain what risk factors and what control measures can be taken?
Computer Workstations risks and controls:
Repetitive activity- mouse
Awkward posture-adjustable workstations, work space organization
Static loading-chair
Pressure on tissues on sharp edges- wrist rests, chairs
Personal facts- exercises and education, hard to control
What are the risks associated with manual material handling and lifting?
Manual material handling and lifting risks: Frequency of lift or move Load Weight Awkward posture Improper lifting techniques Personal risk factors
What are some control measures for manual material lifting and handling?
Controls for manual material lifting and handling:
Plan before move or lift
Limit frequency of move or lift and range of motion
Recommended maximum weight limits
Use medical aids
Job redesign
Consider all risk control techniques-elimination, engineering, administration, substitution, PPE, training
What are the benefits of a workplace substance abuse program?
The benefits of a workplace substance abuse program: Increased productivity Improved attendance Fewer Accidents Decreased employee turnover less employee-related crimes reduced workers compensation costs lower health care costs compliance with federal contract requirements compliance with legislation insrance premium credit
What are the risk control measures for employee substance abuse?
Employee substance abuse risk control measures:
Clearly stated policies and procedures
Clearly stated drug and alcohol testing protocols
Substance abuse program training for managers and supervisors
Employee education
Employee assistance programs
What are the risk factors associated with employee workplace violence?
Employee risk factors for workplace violence: Gaps in employment False or incomplete application Unfavorable or false references Drug or alcohol use Fixation with weapons Frequent or graphic talk of violence Insubordination or violent acts Instability
What are the risk control measures to prevent or reduce workplace violence?
Risk control measures to prevent/reduce workplace violence: Physical controls Hiring Practices Administrative measures Training Program Evaluation
What are the common sources of employment practices?
Common sources of employment practice liability: Discrimination Sexual Harassment Wrongful Termination Retaliation
What are the risk control measures for employment practices?
Employment practices risk control measures:
Risk control measures for employment practices require sound policies and procedures. They must be established to address all applicable laws, communicated to all personnel, clearly understood and universally applied; not adhering to a policy is worse than not having a policy. They must also be regularly reviewed for content, legal conformity, and intent.
What are the e-business or cyber risks?
E-business/cyber risks:
Cyber Risk-1st party
Cyber Risk-Business Interruption
Cyber Liability-3rd party
What are the risk controls for e-business/cyber risks?
Cyber risk controls:
A cyber risk assessment should be conducted to characterize the nature of the organization’s risk exposure and the potential perils that threaten the security of ESI held by the company.
Management should be advised of the scope of the organization’s cyber exposure and associated regulatory obligations.
Avoidance- do not store “personal data” on any computer that can be accessed from another source if it is not critical for the organization. If the data is not stored where others can access it, it cannot be stolen or corrupted except from internal attack.
Establish protocols for collection, storage, access, dissemination, and protection of electronically stored information.
What are the appropriate responses to a cyber breach of data?
Data breach response:
Treat data breach like other emergency planning-assign roles, identify resources, and develop protocols in advance.
Isolate the source of the breach and remove from affected systems.
Determine the scope of the breach and the exact type of data involved.
Maintain compromised hardware for law enforcement forensic evaluation.
Determine if the nature and scope of the breach triggers any statutory notification requirements.
Initiate required notifications and any additional mitigation steps-offerings of credit monitoring services, etc.
Ensure security changes are implemented to prevent recurrence.
What is claims management?
Claims management is the prompt resolution of an organization’s losses subject to insurance or an active retention program including claims by other entities to which it may be legally or ethically bound.
What is claims management’s role in a risk control program?
Claim management’s role in a risk control program is:
Using claim data to improve business performance
Reducing the total cost of risk management program
Assuring claims management team members, internal or external, are providing an appropriate level of service and following best practices.
Adding value to the risk management department.
Explain the features of the three principal types of claims management plans.
3 principal types of claims management plans and their features:
Insured Plan
Third-party administered (TPA) plan
Self-administered plan
What are the key steps of the claims management process?
The key steps of the claims management process:
Investigation- reporting of the incident/accident/claim, responding to the incident/accident/claim report, gathering information, documentation of activities.
Evaluation- coverage, liability, damage, reserving, documentation. Resolving coverage issues, Liability evaluation, Damage evaluation, Reserving evaluation.
Resolution- 5 non-mutually exclusive possibilities: payment in full negotiated settlement denial litigation subrogation/recovery
What are the three types of alternative dispute resolution?
Three types of alternative dispute resolution:
Mediation- informal/ no evidence
Arbitration- semi-formal process, summary/documentary evidence only, arbitrator’s decision usually final
Mini-trials/Summary jury trials- quasi-judicial format, generally final
What is the role of a third-party administrator (TPA)?
The role of a TPA is:
Adjusts and resolves claims within the organization’s SIR using internal funds
Reports to carrier on high value claims
Will request reimbursement from carrier of funds expended in excess of the retention on reimbursement policies
TPA represents the organization
What are the major considerations or the selection process of a TPA?
Considerations when selection a TPA: Accessibility Risk management information systems Flexibility in account handling Qualifications of staff Best practices and quality control Industry experience and reputation Unbundled services Pricing and value-added services
What are the considerations when selecting defense counsel for an organization?
Considerations for selecting defense counsel for an organization:
Management profile
Work loads
Size of Firm
Attorney’s or firm’s current client base
Experience level, education, and training of the individuals related to the industry of the organization.
Attorney’s reputation in the insurance/business commuity
Fee structure
What are the principles of effective crisis management?
Principals of Effective Crisis Management: Comprehensive Progressive Risk-driven Integrated Collaborative Coordinated Flexible Professional
What are the pre-loss goals of crisis management?
Pre- loss goals of crisis management: Economy of operations Legality of operations Maintain a positive public image. Risk management goal is to obtain full management support and commitment to the crisis management program.
What is crisis management?
Crisis management is the act or process of managing a crisis to prevent the occurrence of a catastrophic loss, if possible, and reduce the impact of catastrophic losses to the organization, including its reputation and brand.
What is a crisis?
A crisis is any critical incident that threatens or causes injury to people or a disruption of normal business operations. An event that occurs with an impact that exceeds the normal response capacity of the affected organization.
What are the characteristics of a crisis?
Characteristics of a crisis:
Has potential to significantly damage reputation or can be entirely self-contained.
Affects one or more asset classes, e.g. people, property, income.
Interrupts operations.
May damage or strengthen consumer, shareholder, and employee confidence.
May involve multiple audiences and stakeholders or may affect only a few.
May be of interest to the media for a long period or may be noted and forgotten quickly.
May be unique and entirely unpredictable or may be largely anticipated.
What are the post-loss goals of crisis management?
Post-loss Goals of Crisis Management: Restore and/or maintain operations Sustain profits and stable earnings Work towards growth Maintain a positive public image Risk management goal is to effectively and economically minimize the operational and financial impact of the crisis.
What are the four essential steps of the crisis management process?
4 steps of the crisis management process: Disaster planning Preparation Response Recovery
What are the components of a crisis management kit?
Components of a crisis management kit:
Lists of response team members and contact info
List of non-employees who should be contacted with their contact info
Local Emergency contact info
Aerial photo of site
Assembly areas/on-site shelter locations
Area maps including evacuation routes and alternative routes
Communication outpost information- location and contact info
Emergency procedures
Master keys/codes
Communication equipment
Cameras
Battery-operated AM/FM radios, weather radio
Battery-operated or manual lighting
Communication systems- external and internal (media)
Utilize when available automated, on-line phone tree to communicate with employees, customers, vendors, suppliers, etc.
What are the key elements of reputation management?
Reputation management keys: Key corporate and strategic asset Crisis management and communication First 24 hours is critical The art of crisis communication Fact-driven story delivered quickly Message discipline Restoring a damaged reputation
