Study 2 Flashcards
The Risk Management Process is used to…..
- Determine exposures
- Provide a plan of action
- Recommend insurance coverage
What are the two types of objectives for risk management?
- Pre-loss objectives
2. Post-loss objectives
What are four pre-loss objectives?
- Social responsibility
- Externally imposed obligations
- Peace of mind
- Cost of risk
What are five post-loss objectives?
- Social responsibility
- Survival
- Operational continuity
- Stable earnings
- Sustained growth
How to calculate earnings?
Revenue - expenses
What are the five steps taken in the risk management process?
- Identifying and analyzing exposure
- Formulating options
- Selecting the best techniques
- Implementing the risk management plan
- Monitoring results and modifying the plan
What are the elements of loss exposure?
(A.P.E.)
A. Assets subject to loss
P. Potential cause of loss (peril)
E. Economic- Financial consequences of loss
What are the five categories of assets subject to loss?
- Physical Assets
- Loss of use of those assets
- Legal liabilities
- Intangible assets
- Human assets
What are the three categories of perils?
- Human (human behavior - vandalism, arson, theft)
- Natural (natural forces - flood, earthquake)
- Economic (changes is consumer tastes, currency fluctuations, depreciation)
What are two techniques used in formulating options?
- Loss control techniques
2. Loss financing techniques
What are the loss control techniques?
(S.N.A.L.L.)
S. Separation or diversification N. Non-insurance risk transfers A. Avoidance L. Loss prevention L. Loss reduction
What three kinds of loss financing is there?
- Retention- absorbing some or all of the loss
- Self-insurance- assuming risk by setting aside money
- Transfer- transfer responsibility for paying losses
Implementing the risk management plan must include…..
- A plan for implementing the risk control program
- A communications plan
- A method to allocate costs
