Fundamentals of Risk Management (OCHS 1433)

Question 1

What are the ‘outcomes’ typically associated with risk

Answer 1

1. Loss
2. Injury
3. Illness
4. Disadvantage
5. Destruction

Question 2

Loss Exposure: Property

Answer 2

• any tangible or intangible asset that can be owned or possessed

1. real property - undeveloped lands, buildings, and other structures
2. personal tangible property - money, securities, A/R, inventory, furniture, equipment, machinery, computers, valuable papers and documents, mobile property (vehicles)
3. personal intangible property - goodwill, copyrights, patents, and trademarks

Note: loss exposure is the risk that property could be stolen, damaged, lost, or destroyed

Question 3

Loss Exposure: Net Income

Answer 3

• losses stem from any event that disrupts normal business activities for a given period of time

1. damage or disruption to property controlled by the organization or by others outside the organization
2. circumstances and events controlled by others that affect the organization’s net income, such as disruptions affecting key suppliers, key customers, distribution locations, and utilities and services
3. legal liabilities such as fines assessed against the organization, cost of defense in a court of law, and expenses associated with such things as product recall or replacement
4. losses to key personnel from accidental disabling injury or death, unplanned early retirement, or recruitment from other organizations

Question 4

Loss Exposure: Liabilities

Answer 4

• losses from a conflict with common, statutory, criminal, or civil laws

1. violation of an obligation to provide legally required performance of a promise (contractual obligation), physical safety freedom of movement, protection of property, security of reputation, right of privacy, or economic freedom
2. organization must ensure it gives proper legal consideration to prevent loss exposures (due diligence)
3. legal wrong is when harm that has resulted as a direct result of actions or inactions of the organization

Question 5

Loss Exposure: Personnel

Answer 5

• from increased expense, or decreased revenue, corresponding to the value of a person’s service to the organization or costs associated with staffing

1. can result from death, disability, retirement, or unemployment
2. loss of customers and corresponding revenue due to the loss of key personnel such as sales staff, or personnel that the company markets as part of their reputation

Question 6

List 3 types of perils – give 2 examples of each

Answer 6

Peril: a loss producing event

1. Human
   - theft
   - carelessness
   - errors
2. Natural
   - fire
   - earthquake
   - storms
3. Economic
   - technological change
   - unemployment
   - political and legal changes

Question 7

Safety

Answer 7

control of accidental losses

Question 8

Accident

Answer 8

an undesired event that results in harm to people, damage to property, or loss to process

Question 9

Incident

Answer 9

• an undesired event which, under slightly different circumstances, could have resulted in harm to people, damage to property, or loss to process
• an undesired event which could or does result in a loss

Question 10

Accident prevention

Answer 10

• application of countermeasures designed to reduce accidents, or accident potential, within a system or organization
• reduction or elimination of behaviours and/or conditions having an accidental potential

Question 11

Danger

Answer 11

general term denoting liability or potential for injury, illness, damage, loss, or pain

Question 12

Hazard

Answer 12

dangerous object, event, behaviour, or condition which can interrupt or interfere with the expected orderly progress of an activity, or can adversely affect the travel path of a vehicle

Question 13

Hazard Analysis

Answer 13

functions, steps, and criteria for the design and plan of work which identify hazards, provide measures to reduce the probability and severity potentials, identify residual risks, and provide alternative methods of further control

Question 14

Hazard Control

Answer 14

means of reducing the risk due to a hazard including; ergonomic design of work tasks, stations, and equipment; arrangement, guarding, and routes; process controls to limit exposure to toxic materials; ventilation and exhaust systems; prescribed work practices including the wearing of a personal protective equipment; visible and/or audible warning devices

Question 15

Hazard Recognition

Answer 15

perception or awareness of a dangerous condition

Question 16

Hazardous Condition

Answer 16

physical condition or circumstance which is casually related to accident occurrence, as to both the accident type and the agency of the accident

Question 17

Injury

Answer 17

physical harm to or damage to a person resulting in the marring of appearance, personal discomfort, and/or bodily hurt or impairment

Question 18

Loss Control

Answer 18

program designed to minimize accident-based losses

Question 19

Loss Prevention

Answer 19

program designed to identify and correct potential accident problems before they result in injury or financial loss

Question 20

Risk

Answer 20

probability during a period of activity that a hazard will result in an accident with definable consequences

• original risk: from an unanalysed, uncontrolled activity
• residual risk: after analysis and some action to control
• calculated risk: specific analysed risk and, where possible, quantified; probabilities measuring risk in project or activity
• group risk: rates and projections for a class of exposure

Question 21

Risk Acceptance

Answer 21

amount or degree of potential danger that an individual identifies as willing to take

Question 22

Risk Assessment

Answer 22

• information, hazard analysis method, and control program evaluation which permit estimation of risk
• amount or degree of potential danger perceived by a given individual when determining a course of action for a given task

Question 23

Risk Management

Answer 23

• professional assessment of all loss potentials in an organization’s structure and operations, leading to the establishment and the administration of a comprehensive loss control program
• related to and dependent upon an ongoing program of accident prevention, risk management encompasses the selection of purchased insurance, self-insurance, and assumed risk
• goal is to reduce losses to an acceptable minimum at the lowest cost

Question 24

Risk Benefit Ratio

Answer 24

measure of the relationship between the risks involved in a particular method or course of action and the benefits gained by the use of that method

Question 25

What 4 facets of a process does the Loss management process look at

Answer 25

1. people
2. equipment
3. materials
4. environment

Question 26

Describe the 4 components of the business cycle the loss management process looks at – what is the risk associated with each

Answer 26

1. Concept: product or service to be delivered goes through the research and development stage
   - major potential risk = financial -> will the investment pay off?
2. Design: product or service to be marketed is finalized and developed into a marketable item, and the facilities to produce and deliver the product or service built
   - major potential risk = market change before delivery and risks involved in the building process
3. Operation: product or business cycle peaks and maximum profitability occurs, as does maximum risk to people, equipment, materials, and the environment
   - major risk = financial -> over produced product that cannot be sold
4. Disposal: product or business cycle has peaked and profitability is in decline
   - major risk = financial -> whether to stay operational by reinventing the business or creating new products or services, or go out of business; diminished organizational resources can also put the loss management function at risk

Question 27

Loss Management

Answer 27

Mission: preventing losses from start to end

Involves:

• hazard recognition, OH&S, technology, and controls (what’s our potential for loss? can we handle it?)
• safety practices beyond personal injury prevention (equipment, material, and environment)
• motivated by financial impact

Question 28

Risk Management

Answer 28

Mission: control or financing of all losses

Involves:

• controls, finances, law, insurance
• controlling or financing a wide variety of risks not normally considered by loss managers
• tend to look at the “big picture” of the financial health of an organization

Question 29

Overlap of Loss and Risk Management

Answer 29

1. Identification of exposures
2. Analysis and evaluation of exposures
3. Implementation of funding and preventative measures

Question 30

Describe 3 essential criteria when evaluating risk

Answer 30

1. Severity - how big will the loss be in terms of injury or dollar value or both
2. Frequency - how often does the exposure occur
3. Probability - how likely the loss will occur given the interaction of people, equipment, materials, and the environment

Question 31

What is the four T approach used to determine the best method to dealing with risk

Answer 31

1. Treat - accept the risk, providing it can be altered to be made safe or at least safer (automatic sprinklers)
2. Tolerate - accept risk, but endeavour to make it safer by various loss control programs
3. Terminate - risks are too high and work will not be done (discontinuing product, changing procedure, removing equipment)
4. Transfer - risk must be taken, but costs could be high if something should go wrong. Monetary risks are transferred to another agency (insurance, WCB)

Question 32

Provide examples of legislation associated with Loss management / Risk Management

Answer 32

Loss Management:

• Workers’ Compensation Act
• Occupational Health and Safety
• Regulation
• Elevating Devices Safety Act
• Electrical Safety Act
• Fire Services Act
• Gas Safety Act
• Power Engineers and Boiler and Pressure Vessel Safety Act
• Transport of Dangerous Good Act

Risk Management:

• Bonding Act
• Commercial Tenancy Act
• Frustrated Contract Act
• Insurance (Captive Company) Act
• Insurance (Marine) Act
• Insurance (Motor Vehicle) Act
• Negligence Act
• Occupiers Liability Act