Assignment 1 Risk Management Essay Risk and Insurance Module

Objective Risk:
1) Fits our definition “Relative variation from expectations” Or “expected loss” ( the average Historical loss) ($sum/ Number of years)
2) Measurable by looking at historical experience
Objective defined: condition in the realm of sensible experience, independent of individual thought and perceptible by all observers…dealing with facts…without distortion by personal feelings or prejudices
Subjective Risk:
Uncertainty based on thoughts
Merriam Webster:
Involving or deriving from sense, perception or experience with actual objects
Most risks are both “objectively” and “subjectively” risky, that is, unless you have completely “wrong” information
Rick is variation or standard deviation from the average (or mean )
The law of large numbers
• As the number of observations (exposures to risk) increases, the more the sample mean will approach the actual mean
• Objective risk varies inversely with the number of exposures to risk
• Outcomes (of loss) are more predictable the more exposures you have
• Foreshadowing: This is why insurance works!!!
Speculative Risk: Chance of gain , loss or neutral outcome
Pure Rick is only chance of loss or neutral outcome
Insurance only insures?? but Risk Management’s focus has shifted…..
Enterprise Risk Management: Pure Risk, Financial Risk, Operational Risk, Strategic Risk
Fundamental Risks: effects a large segment of society “ Nondiversifiable “Like war Thunder
Particular Risks: Affects individuals, families and individual organizations “diversifiable”. Accident, Credit card, death, theft
The trick is deciding and agreeing upon which risks are fundamental
How are losses from fundamental risks normally paid for?
Personal or Human Resource: Death, sickness injury & employee benefits. Includes many indirect cost
Property ( personal or Commercial) . Loss of valve & Loss of use
Liability (personal or Commercial) Third – part risk. Can be property or bodily injury. You must pay because you are “ legally liable”
Frequency – number of times something happens in a given period
Severity – size of loss
Frequency can be converted into “probability”
Frequency become probability when you divide it by the number id times it could have happened
Related Term: Expected Loss Frequency * Severity (of Loss) = Expected Loss
Frequency is the chance of loss
Calculating an “expected loss” for employee theft:
We might be 170% likely to have one loss over the year
Most individual losses are $1,000
Expect loss = 1,000 x 170%n = 1,700
Perils is the causes of loss
Hazard that results from the carelessness of an insured. Condition that increases the frequency or severity of loss
Type of Hazard: Physical, Moral Hazed (resulting from dishonesty and defective in character) Morale Hazard (carelessness)
Legal Hazard which is an increase in costs and fines because certain laws are passed
• Compliance with building codes
• OSHA regulation
• Employment discrimination / lawsuits
• Affordable care ACT

Currently, it is fundamental to any individual or organization to focus on risk management. According to Lam (2014), insurance is perceived as one of the best practice in risk management. This is however hedged on the level of implementation of risk management practices and abiding by the set rules and conditions of subscriptions. The most successful risk management through insurance abides by a distinct corporate culture which is aligned to the expected performances with the incentives and subsequent matching of the authority and individual expectations in making decisions with an ultimate accountability for decisions made. In a general perspective, the most incentive insurance covers rewards returns. Nevertheless, without reflection of the risk undertaken to achieve the returns cannot be possible. In this essay, it is argued that a proper alignment of the risk type either objectively or subjectively contributes to the appropriate insurance cover subscription.
Risk management
The risk management is a process that is implemented to understand, analyze and address a myriad of risks that make sure that organizations and individuals achieve their objectives. In this case, the success of risk management is ensuring that the process is proportionate to the complexities and types of the organizations involved. As noted by Hardy (2003) the enterprise………….Please click the paypal icon below to receive this assessment for only $15