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Avoidance and Loss Prevention: Risk Control Techniques that reduce loss frequency
2.
Diversifiable Risk: aka non systematic risk or specific risk, is a risk that affects only some individuals, businesses, or small groups. Fire is a diversifiable risk.
3.
Elements Of Loss Exposures: 1. Asset exposed to Possible Loss
2. Peril Immediate Cause Of the Loss
3. Consequences of Loss (Financial)
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Enterprise Risk Management: term commonly used to describe the broader view of risk management that encompasses both hazard and risk
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Enterprise Risk Management: manages all of the organizations key risks and opportunities with the intent of maximizing the organization's value. evaluate correlations or interdependence among loss exposures
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Enterprise Risk Management Loss Exposures: Strategic, Hazard, Financial, and Operational Risk
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ERM Framework: 1.Avoidance: exiting the activities giving rise to risk
2.Reduction: taking action to reduce the likelihood or impact related to the risk
3.Share or insure: transferring or sharing a portion of the risk, to reduce it
4.Accept: no action is taken, due to a cost/benefit decision
8.
Financial Risk Management: identification, analysis, and treatment of speculative financial risks. They include Commodity price risk, interest rate risk, and currency exchange rate risk.
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Four Classifications of Hazard: 1. Moral Hazard
2. Morale Hazard
3. Physical Hazard
4. Legal Hazard
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Four Elements of Negligence: 1. Existence of a legal duty
2. Failure to perform that duty
3. Damages or injury to the claimant
4. Proximate cause relationship
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Four Types of Loss Exposures: 1. property
2. liability
3. personal and personnell
4. Net income
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frequency: number of losses in a specified period of time
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Goals Of Risk Controls: Implement effective and effiecient risk control measures
Comply with legal requirements
Promote Life Safety
Ensure business continuity
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hazard: is a condition that increases the frequency and/ or severity of a loss. Example , a fire hazard, storing oily rags next to a furnace, increases the frequency and/ or severity of loss caused by fire.
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Hazard Analysis: method of analysis that identifies conditions that increase the frequency or severity of loss
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Identifying Loss Exposures: Document analysis, Compliance Review, Inspections, Expertise within and beyond the organization
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Integrated Risk Program: a risk treatment technique that combines coverage for pure and speculative risks in the same contract
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Liability Loss Exposure: possibility of loss due to a claim alleging responsibilty for injury or a damage
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Loss Exposure: a situation or condition that exposes an asset to a loss and any condition that has the possibility of causing lose whether or not the loss occurs.
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Loss Prevention: a risk control technique that reduces the frequency of a particular loss. Pressure relief valves on a boiler are intended to prevent explosions.
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Loss reduction: risk control technique that reduces the severity of a particular loss. example automatic sprinklers bc they don't prevent fire but reduce the damage
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Loss Reduction, Seperation, Duplication, and Diversification: Risk control Techniques that reduce loss severity
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Moral Hazard: a change in behavior in the presence of insurance that increases frequency or severity or both. can be honest and dishonest
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Morale Hazard: carelessness or indifference that increase frequency, severity, or both. Physicians spreading merca
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Negligence: failure to exercise the standard of care required by law to protect others from an unreasonable risk of harm
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Nondiversifiable risk: Systematic risk, is a risk that affects a large segment of society at the same time. Examples are inflation, unemployment or natural disasters.
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Objective Risk: the measurable variation in uncertain outcomes based on facts and data
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Peril: immediate cause of loss
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Personal Property: All tangible property other than real property
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Physical Hazard: is condition of property, persons, or operations that increase frequency and/ or severity of loss.
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Post Loss RM Goals: 1. Survival
2. Continuity of Operations
3. Profit and Earning Stability
4. Growth After Loss
5. Social Responsibility/ Ethical Conduct
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Pre loss goals/ objectives: goals to be met even if no loss occurs.
Efficiency, Tolerable Uncertainty, Legality, and Ethical Conduct/ Social Responsibility
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Probability Analysis: technique for forecasting events on the assumption that are governed by unchanging probability distribution
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Property Loss Exposure: condition that presents possibility of loss due to damage destruction. theft/ robbery or loss of value
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Pure Risk: a chance of loss or no loss, but no chance of gain. A house faces a risk associated with a possible fire loss.
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Real Property: Tangible property consisting of land, all structures permanantly attatched to the land, and whatever is growing on the land.
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Risk Control Techniques: Avoidance, Loss Prevention, Loss Reduction, Seperation, Duplication, Diversification
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Risk Management Information Systems: a computerized data base that permits the risk manager to store and analyze risk management data and to use such data to predict attempt to control future loss levels
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Risk Maps: grids detailing the potential frequency and severity of risks faced by the organization
40.
Seperation, Duplication, and Diversification: Risk control techniques that make losses more predictable
41.
severity: the dollar amount of specific loss
42.
Speculative Risk: a chance of loss, no loss, or gain. An example is gambling.
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Subjective Risk: percieved as the amount of risk based on an individual's or organization's opinion
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The Risk Management Process: 1. Identification of Loss Exposures
2. Measurement & Evaluation of Loss Exposures
3. Identify Possible RM options/ alternatives
(Risk Control or Risk Financing)
4. Select from among risk management options
5. Implement
6. Benchmark and Evaluate
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Timing: when losses occur and when loss payments are made
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Traditional Risk Management: risk management professional's role has been associated with loss exposures related to hazard risk
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Value at Risk: worse possibly loss to occur in a given time period under regular market conditions at some level of confidence. (applied to a mutual fund and pension plan)
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What do you do in ERM?: you take a risk and attempt to turn it into an advantage
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What does Traditional Risk Management practice at?: practice at business unit primarily manage at the strategic level
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What does TRM encompass?: Property Loss Exposures ( Real and Personal)
51.
What two risk control techniques directly reduce net income losses?: Seperation and Duplication
