IMch08 - CHAPTER 8 Selecting and Implementing Risk...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
CHAPTER 8 Selecting and Implementing Risk Management Techniques AVOID RISKS IF POSSIBLE IMPLEMENT APPROPRIATE LOSS CONTROL MEASURES Analyzing Loss Control Decisions Present Value Analysis An Example SELECT THE OPTIMAL MIX OF RISK RETENTION AND RISK TRANSFER General Guidelines Selecting Retention Amounts The Deductible Decision The Self-Insurance Decision IMPLEMENTING DECISIONS Risk Manager versus Insurance Agent Organization for Risk Management Commercial Risk Management Managing a Risk Management Program SUBJECTIVE RISK MANAGEMENT Obtaining More Information Group Discussion ENTERPRISE RISK MANAGEMENT AND ALTERNATIVE RISK TRANSFER Alternative Risk Transfer Tools KEY TERMS AND CONCEPTS Net present value Present value Third-party administrator Opportunity cost Risk management policy ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1. Risk management decisions must be reviewed regularly because so many relevant factors change. The nature of an exposure may change over time, or the frequency and severity of losses may vary, causing estimates to become out of date. The selection of appropriate techniques is a dynamic, not static process. 2. One step is to avoid risks, if possible. The second is to implement appropriate loss control measures. The third is to select the optimal mix of risk retention and risk transfer. 3. Effective loss control can reduce the frequency and severity of expected losses. This reduction may provide the opportunity for a company to retain more than it would without the loss control techniques. The company may decide to take a higher deductible or self-insure. 4. $793,832.24, calculated as: $1,000,000 / 1.08 3 . 5. Some of the inflows to be considered are reduced costs resulting from loss reduction, premium savings, tax savings resulting from depreciation of loss control equipment, and possibly some salvage value of the equipment. The outflows are the costs of training and maintenance of the equipment.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern