risk management Flashcards
definition of risk management
the process that identifies losses faced by an organization and the decision or election of an appropriate method to deal with it
status of risk management
reactive –> proactive
present in most large corporations
primary objective of risk management
prepare for loss and the economic impact of it
pre-loss objectives
economy goals reduction of anxiety meet externally imposed obligations creditors legally imposed contractually imposed
economy goals
best way to save money is be prepared for loss
reduction of anciety
a happy worker is a productive worker
goal is to be prepared and ease people’s thoughts
creditors
creditors may run an analysis of borrowers, being on insurance/prepared allows for you to have possible better credit
legally imposed
may have to comply with things like building codes
contractually imposed
may have to comply with things like termination clauses
post-loss objectives
survival of the firm continued operations stability of earnings continued growth social responsibility
five steps of the risk management process
- identification
- analysis/measurement
- selection for risk management techniques
- implementation
- continual evaluation
two things to consider when identifying potential losses
cost of risk and cost trade offs
how to find cost of risk
calculate expected loss
determine possibliity of loss control and cost associated with it
determine possibility of loss financing
is internal risk reduction available?
cost trade offs
risks to operate
epected losses/loss control
loss of financing of expected indirect loss
loss financing of residual uncertainty
types of potential loss
physical damage to property, loss of income, liability lawsuits, death or disability of key persons, losses from job injuries/disease, losses from fraud, criminal acts, and employee dishonesty, employee benefits loss exposure, international loss exposures/political risk
