Risk Management

Please consult with your insurance, legal or risk management team member for further information specific to your business.  

Risk in business refers to the change of loss, the profitability after an event of loss, the amount of possible loss and triggering events.  Risks can be classified into two types, those of pure and those that are speculative.

Pure Risks refers to the threat of loss and the situation has zero chances for profitability.  This refers to accidents, fires, thefts; any events where a company loses money when the loss is triggered, but does not gain anything when the event does not occur is a pure risk.  Strategies developed around risks have 4 popular solutions.

Speculative Risks refers to situations where the organization can see loss or profit.  Some examples of speculative risks include the purchases of new equipment or machines, acquiring inventory, purchasing stock, or investing in new facilities.

1. Reduction of Risk value
2. Risk Deterrence Procedures
3. Insurance Against Risk From Organization or Outside Insurance

Reduction of Risk value

A Loss-prevention program can reduce the amount of loss from an event.  Certain Loss Prevention programs include fire drills to preserve life and property in the case of a fire, health education to help individuals preserve their health and need less treatment, safety inspections to ensure quality and safety around equipment and employee safety habits, equipment maintenance to make sure equipment is functional, efficient and safe; accident prevention programs can be made according to specific risks in a dynamic business environment.  Loss Prevention Programs can use equipment as well.  Security against theft often necessitates cameras, mirrors, scanners, tags, wired attachments on displays, and tougher packaging.

Risk Deterrence Procedures

Although all risks can not be avoided through equipment or policies.  The chances of accident, fire, injury, or theft.  The threat of legal liability has seen some companies form as LLC’s or outsource certain functions of the business value proposition.   Financial Losses can be deterred by utilizing  equipment, policies and research.  Many analysis’ and reports can help deter financial lost from investments or help guide profitability from investing actions.

Insurance Against Risk From Organization or Outside Insurance

Personal-insurance policies from the organization is in its most basic form, the allocation of funds aside to cover claims.  Certain risks can not be insured, such as market, product development elements, political risks.  There are also specific public insurance policies that exists.  Unemployment compensation, Social Security, Federal Housing Administration, National Flood Insurance Association, Federal Crime Insurance, Federal Crop Insurance, Pension Benefit Guaranty Corporation; are all necessary and some of the most important public insurances available.

Insurable risks include:

1. Where the policy seeker has an insurable interest
2. The lost must be measurable
3. The chances of opportunity or loss must be measurable
4. The loss must be an accident to the definition of the term in policy
5. The company to the insurer must be dispersed.  So that claims may not be consolidated.
6. The insurance company must be able to set policies and procedures to assess and insure risks.

Rule of Indemnity

The rule refers to an insured person or organization can not collect more than the actual loss from an insured risk.  Nor can insurable risks have multiple insurance policies on them for the same risk.  The goal of this limitation is to make sure one can not gain from risk management, only minimize the amount of losses.

Common Property and Liability Insurances

• Fire
• Automobile
• Homeowner
• Computer Coverage
• Professional Liability
• Business Interruption
• Nonperformance loss protection
• Criminal loss protection
• Commercial credit insurance
• Public Liability Insurance
• Extended Product Liability Insurance
• Fidelity Bond
• Surety Bond
• Title Insurance
• Cyber Attack Insurance

Health Insurance

• Basic Health
• Major Medical
• Hospitalization
• Surgical and Medical
• Dental
• Optical
• Disability Income Insurance

Life Insurance

• Group Life
• Owner or Key Executive
• Retirement and Pension Plan
• Credit Life