Risk Management Process and Administration

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Thoroughly understand the goals and functions of the organization.

Different organizations faced different types of risks.

Example (types of exposures); Property risks – buildings, machinery, office

equipment, etc. Liability risks – public, product, employer. Human resource or personal risks – death,

injuries, retirement, sickness.

Hazila Ismail, INS 657, Chapter 3 4

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Critical Severe financial impact that could result in bankruptcy (eg; food contamination).

Important Moderate financial impact that will not result in bankruptcy but require resort to credit.

Unimportant Modest financial impact that could be met from existing assets or cash flow without imposing undue financial strain.

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Measuring the potential size of the loss and the probability that the loss is likely to

occur

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Severity maximum probable loss

Frequency likelihood of occurrence

Hazila Ismail, INS 657, Chapter 3 8

The implementation of risk management program by applying the identified techniques .

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Permits the risk manager to review decisions and discover

mistakes before it become costly

Two misconceptions have developed concerning risk management.

The first is that the risk management concept is applicable principally to large organizations.

The second is that the risk management

approach seeks to minimize the role of insurance.

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