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Risk & Risk Management
- 1. RISK AND RISK MANAGEMENT PRESENTED BY : DEVANSHI PANDA - 38 SREEMOTI SENGUPTA - 73 SONALIKA DAS - 113KALPITA MAHAPATRA- 119ANSULA MOHANTY - 180
- 2. RISK It isdefined as an uncertainty consulting the concurrency of the loss.
- 3. Categorized into two types:
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- 6. Objective Risk: It is a variable of actual loss from excepted loss.Subjective Risk: Based on persons mental conditions or state of mind.
- 7. CHANCE OF LOSSDefinedas probability that event can occur.Divided into two types:Objective ProbabilitySubjective ProbabilityObjective Probability: long run relative frequency of an event based on the assumption of an infinite no. of observation and there is no change in underline conditions .Subjective Probability: It is individual personal estimate of the chance of loss.
- 8. SOME RELATIVE TERMSOF RISKPERIL: Defined as a cause of loss.Hazard: It is a condition that creates or increase the chance of loss. It is again divided into 4 types:
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- 12. LegalPhysical: physical condition that increases the chance of loss.Moral: It is dishonesty or character defect in an individual that increases the frequency or severity of loss.Morale: It is the carelessness or indifferent to a loss .Legal: It refers to the characteristics of the legal system or regulatory environment that increases the frequency or severity of the loss.
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- 14. Fundamental Risk: It is defined in which effect the entire economy or large no. of persons or groups within the economy.Particular Risk: It effects only the individuals not the the entire community.Enterprise Risk: It is a relatively new term that encompasses all major risk faced by a business norm.
- 15. Speculative Risk:It isa situation in which either profit or loss is possible.Pure Risk: It is defined as a situation in which there are only the possibility of loss and no loss.There are different types of risk exist which are as follows:
- 16. Personal Risk: It directly effects an individual.Property Risk: Under this risk contains direct loss and indirect loss.
- 17. Direct loss: It is a financial loss that results from the physical damage ,destruction or theft of the property.Indirect loss: It is the financial loss that results indirectly from the occurrence of the direct physical damage or theft.Liability Risk: It is another type of pure risk that most person face under legal system, that one can be held legally liable for something that results in bodily injury or property damage.
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- 19. Objectives of Risk Management:Pre loss :
- 20. The firm should prepare for potential losses in the most economical way.
- 21. Reduction of anxiety
- 22. Meet any legal obligation.
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- 24. Survival of the firm
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- 26. Stability of earning
- 27. Continue growth of the firm
- 28. Minimize effects that a loss will have on other persons and society.Steps in Risk Management Process
- 29. There are five methods of identifying loss exposures.Risk Analysis QuestionnairesPhysical InspectionFlowchartsFinancial StatementsHistorical Loss dataAnalyze the loss exposure: It involves estimation of frequency & severity of loss. Loss Frequency: Probable number of losses that may occur during some given time period.
- 30. Loss Severity:It refers to the probable size of the losses that may occur.Both maximum & maximum probable loss are estimated.
- 31. Maximum possible loss is the worst loss that could happen to a firm during its lifetime.
- 32. Maximum probable loss is the worst loss that is likely to happen.
- 33. Select appropriate techniques for treating the loss exposures: It broadly consist of two techniques:
- 34. Risk Control:It describes techniques for reducing the frequency or severity of loss.Avoidance: It means a certain loss exposure is never acquired , or an existing loss exposure is abandoned.
- 35. Loss Prevention: It refers to measures that reduce the frequency of a particular loss.
- 36. Loss Reduction:It refers to measures that reduce the severity of a loss after it occurs.2.Risk Financing: It refers to the techniques that provide funding of losses after they occur.
- 37. Retention : It means that the firm retains part or all losses that can result from a given loss. It can be either active or passive.
- 38. Noninsurance Transfers: Noninsurance transfers are methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party.
- 39. Commercial Insurance: Commercial insurance is also used in a risk management program. Insurance is appropriate for loss exposures that have a low probability of loss but for which the severity of loss is high.Implement & Monitor the risk management process.
- 40. Risk Management Policy Statement: This statement outlines the risk management objectives of the firm.
- 41. Risk Management Mannual : It consists of details of risk management program & helps in training new employees .
- 42. Co operation with other departments like accounting , finance , marketing , production and human resources.