• Chapter 4: Review section, pg. 60: Questions
1. How is loss prevention different from loss reduction? Give some example of each.
Risk management purpose is to prevent and reduce the frequency and severity of potential losses. Loss prevention programs promote avoidance of losses, measuring the loss frequency. Some examples are safety programs implemented to prevent workplace injuries, fire detectors, burglar alarms, and other protective devices to prevent losses caused by fire and theft. Insurance companies offer discounts to organization or individuals taking loss prevention measures as incentive for their participation.
While, in loss reduction the scope of the programs limit the extent of losses, when they do happen. Decreasing the severity, helps to minimize the impact of the loss in the organization. Examples, clear procedures and warning signs postings, airbags in the vehicle, firewalls and fire doors.
Both risk controls are only justified when savings exceed loss.
6. Describe the advantages and disadvantages of using insurance as a loss-financing techniques.
Insurance use as a loss-financial technique provide financial advantage. Business write the insurance premiums cost as a tax deduction expense. As long as the premiums are fix for the duration of the policy the budget is not. In addition, when the organization loss frequency is low and severity probability is high, insurance provide the require funds in case if loss. Which, will be impossible for some individuals and organization to provide on their own.
For the contrary the loading change (fee to cover the incurred administrative expenses) can be expensive. Also, the insurance sometime fails to meet demand providing limited protection, this insurance shortage can lead to ineffective insurance regulations. As well as, for consumer with minimum loss experience, their premium will be high, because their probability of loss is high.
• Chapter 5: Review section, page 78: Questions
14. From the viewpoint of the option holder, what is the difference between call option and put option?
“Options give you the right (without the obligation) to transact a security at a predetermined price within a certain time period. In a call option, the buyer has the right (but is not required) to buy an agreed quantity of a commodity or financial instrument (called the underlying asset) from a seller by a certain date (the expiry) for a certain price (the strike price). A put option is the right to sell the underlying stock at a predetermined strike price by a certain date” (Call Option vs Put Option, 2014).
Chapter 6: Review section, page 92, Question
All organizations and industries experience risk exposure, from both internal and external events. Accordingly, with outcome speculation being uncertain, organizations can experience either negative or positive effects. In general, the IS31000 defines risk as the “effect of uncertainty on objects” (Elliott, 2012 p.1.4). Consequently, the application of risk management practices helps minimize the effects of risk uncertainty on an organization and is accomplished through coordinating an organization’s activities by establishing control and creating policies in regards to risk. Risk’s most evident category is hazard risk which encompasses risk from accidental loss. In addition, operational risk stems from controls,
Insurance is a subject that not everyone wants to talk about because it’s something that only gets brought up when they have an incident that happens to them or they might just not know enough about it. The insurance business is a huge business, which many people don’t realize that the top richest companies are all insurance companies. It is an interesting industry that not enough people know a whole lot about and through watching the film “Cedar Rapids”, you get some accurate depictions on the inside of the industry through an insurance agent’s and even though it’s not shown, an insurance broker’s point of view. Throughout this film there were some interesting points that many people might not be able to tell, but some are accurate in
Included are the purpose, goals, and scope of both a risk management and emergency plan, with an overview of an actual plan. Many of the agencies use in-person site surveys and inspections to monitor compliance. Furthermore, liability insurance companies, including those covering malpractice, usually require a formal risk management plan be in place. Goals Each organization’s risk management goals should be consistent with and supportive of its mission statement, strategies, and targeted markets.
Five techniques for reducing accidents would be selection and placement; posters and other propaganda; safety check list; complete training; incentive programs and positive reinforcement; establishing a safety policy; management commitment to emphasizing safety. • Explain how you would reduce stress at
Real-world events is probably the more significant of the group; using a risk management program allows decision makers access to critical information related to potential outcomes of an event/incident. The decision makers use the information to exam the most appropriate and lower risk approach to an event/incident. The NIPP risk management program used the risk management for three specific threats, physical, cyber, and human to protect CIKRs (U.S. DHS 2009, p.33). When risk management is implemented correctly and all areas assessed thoroughly, it can produce the best course of action to protect homeland security infrastructure over a larger area through the cooperation of and between the different NIPP established sectors. Exercise planning and risk management work well together exercises also provide feedback for risk management for real-word events. Exercising the possibilities of an incident/event provide a realistic basis for establishing certain understanding of an incident without the high risk associated with a real-world
At Colling Insurance Services, Inc. we understand that purchasing insurance is a little complicated to the average person. They aren’t familiar with the industry lingo that governs the policy. If you are like the average person, when it comes to purchasing insurance, you may purchase the least expensive insurance possible, and not understand the risks you expose yourself to as a result of focusing solely on costs. If you’ve done this in the past, umbrella insurance may be able to help you cover deficits.
Risk management – Captives offer the parent company a more sophisticated toolset with which to manage their enterprise risk by utilizing the captive in conjunction with the commercial insurance marketplace. This provides an opportunity to insure against liabilities that may be generally uninsurable or excessively priced but also to strategically retain certain risks via the captive to improve attachment points and evaluate risk financing alternatives.
Insurance is a very important part of modern life and business. In this paper I will discuss the basic concepts of insurance, claims-made and occurrence liability policies, factors for selecting an insurance company and policies, and the difference between workers compensation and liability insurance.
One must get familiar with the call option and put options of option pricing to see how transactions are made. The call option is a contract between the buyer and the seller. The buyer “has the right, but not the obligation to buy an agreed quantity of a particular commodity or financial instrument from the seller” (Call option, 2011). The buyer has to pay a small fee for this right to make the seller sell upon the buyer’s choosing. The put option is a contract between the buyer and seller “to exchange an asset, the underlying, for a specified amount of cash, the strike, by a predetermined future date, the expiry or maturity” (Put option, 2011).
Over the past decade, risk and uncertainty have increasingly become major issues which impact business activities. Many organizations are raising awareness to minimize the adverse consequences by implementing the process of Risk Management Framework which plays a significant role in mitigating almost all categories of risks. According to Ward (2005), the objective of risk management is to enhance a company’s performance. In particular, the importance of the framework is to assist top management in developing a sensible risk management strategy and program.
Risk mitigation is also the process of controlling actions, which are identified, and selecting the suitable ones to reduce risk according to project objectives (Pa, 2015). Risk mitigation is important in IT organizations in so many ways. According to Ahdieh, Hashemitaba, Ow (2012), mitigation of risk provides a mechanism for managers to handle risk effectively by providing the step wise execution of the risk handling (as cited in Pa, 2015, pg. 49). Some risks, once identified, can readily be eliminated or reduced. However, most risks are much more difficult to mitigate, particularly high-impact, low-probability risks. Therefore, risk mitigation and control need to be long-term efforts by IT project managers throughout the project lifecycle. There are three types of risk mitigation strategies that hold unique to Business Continuity and Disaster
Ultimately, a strong ERM program will allow the organization to manage risk successfully by instilling an ongoing process. The importance of enterprise risk management is to ensure that the program is not managed in individual departments, but rather utilizing a holistic approach. According to Fraser & Simkins, in the text, Enterprise Risk Management, the common result of a stove-pipe approach to risk management is that risks are often managed inconsistently these risk may be effectively managed within an individual business unit to acceptable levels, but the risk treatments or lack thereof selected by the manager may unknowingly create or add to risks for other units within the organization.
Risk management is a process used in all industries to reduce the risk. The Risk management tool usage changes from sector to sector and hence each sector has developed their own risk management tools and methodologies to mitigate the risk. But the concept remains the same behind all the tools (Ropel, 2011). The main steps for risk management irrespective of the sector are:
The purpose of risk management is to protect an organization’s valuable assets information, hardware, and software. The purpose of risk management process is to identify and manage risks in such a way that a company is able to meet its strategic and financial targets. Risk management is a continuous process, by which the major risks are identified, listed and assessed, the key persons in charge of risk management are appointed and risks are prioritized according to an assessment scale in order to compare the effects and mutual significance of risks. It is very important that the organizations and business to be very well prepared to see what kind of risk we are facing, or the business can suffer in case of a major disaster.
Risk Management allows us to identify the problems which are unknown during the start of the project but may occurs later. Implementing an efficient risk management plan will ensure the better outcome of the project in terms of cost and time.