Chapter 02 (1)

Chapter 02 (1) - Risk Management Process (1) Identify risks...

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1 Risk Management Process (1) Identify risks (2) Evaluate risks (3) Examine and Select risk management techniques (4) Implement and review decisions
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2 Chapter Objectives Explain several methods for identifying risks Identify the important elements in risk evaluation Explain three different measures of variation Explain three different measures of central tendency Discuss the concepts of a probability distribution and explain the importance to risk managers Give examples of how risk managers might use the normal distribution Explain the importance of the law of large numbers for risk management
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3 Risk Identification Loss exposure Potential loss that may be associated with a specific type of risk Can be categorized as to whether they result from Property Liability Life Health Loss from income risks
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4 Risk Identification Loss exposure Checklists Specifies numerous potential sources of loss from the destruction of assets and from legal liability Some are designed for specific industries Such as manufacturers, retailers, educational institutions, religious organizations Others focus on a specific category of exposure Such as real and personal property
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5 Risk Identification Financial statement analysis All items on a firm’s balance sheet and income statement are analyzed in regard to risks that may be present
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6 Risk Identification Flowcharts Allows risk managers to pinpoint areas of potential losses Only through careful inspection of the entire production process can the full range of loss exposures be identified
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7 Figure 2-1: Flowchart for a Production Process
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8 Risk Identification Contract analysis It is not unusual for contracts to state that some losses, if they occur, are to be borne by specific parties May be found in construction contracts, sales
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This note was uploaded on 06/25/2011 for the course FINA 341 taught by Professor Thompson during the Spring '11 term at South Carolina.

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Chapter 02 (1) - Risk Management Process (1) Identify risks...

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