Lecture24 - 12/3/2010 MGMT 4370 / MGMT 7760 Risk Management...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
12/3/2010 1 MGMT 4370 / MGMT 7760 Risk Management Aparna Gupta Lally School of Management and Technology Office: PITTS 2104 Email: guptaa@rpi.edu Phone: x2757 Risk Management using Insurance Basic Concepts Operations 2 Aparna Gupta, Lally School, RPI The Risk Management Process Identify Risk Exposures Measure and Estimate Risk Exposures Find ways to Shift or Trade Risks Assess Effects of Exposures Assess Costs and Benefits of Risk Mgmt Instruments Form a Risk Management Strategy Avoid Mitigate (Control) Transfer Keep (Retention) Evaluate Performance 3 Aparna Gupta, Lally School, RPI Risk Management using Insurance Enterprise Risk Management The modern, comprehensive approach to risk management Consists of management of – Pure risk – Speculative risk Strategic risk – Operational risk Insurance is the tool to address the ‘Pure’ risk component The method would follow the flow chart seen before. 4 Aparna Gupta, Lally School, RPI Traditional View of Risk Management using Insurance • This can play an important role in the ERM spectrum. We wish to, in particular, look at: • Basic concepts in insurance • Basic principles of insurance • Role of Insurance in Risk management • Operations of an insurance provider –P r i c i n g – Underwriting – Claims – Reinsurance Aparna Gupta, Lally School, RPI Defining Risk – all over again Risk : Uncertainty concerning the occurrence of a loss. – In contrast with the previous definition: Variability that can be quantified in terms of probabilities (with no reference to gain or loss) Objective vs. Subjective Risks and Probabilities Objective risk : The degree of relative variation of the actual loss from expected loss. Objective probabilities: The long-run relative frequency of an event based on the assumptions of an infinite number of observations and of no change in the underlying conditions. Subjective risk
Background image of page 1

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

View Full DocumentRight Arrow Icon
12/3/2010 2 Defining Risk – all over again Pure Risk vs. Speculative Risk Pure risk : Situation in which there are only possibilities of loss or no loss, ie., outcomes are either adverse (cause loss) or are neutral (no loss). Examples: premature death, job-related accidents, catastrophic medical expense, damage to property due to fire. Speculative risk
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 4

Lecture24 - 12/3/2010 MGMT 4370 / MGMT 7760 Risk Management...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online