Chapter 01 (1) - What is Risk What is your definition...

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What is Risk? What is your definition of “risk,” specifically as it relates to the business world? 1
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2 Chapter Objectives Explain ways to categorize risk List the components of an entity’s cost of risk Give several examples of risks involving property, liability, life, health, loss of income, and financial losses Distinguish between chance of loss and degree of risk Give examples of three types of hazards Identify the difference between hazards and perils Explain the four steps in the risk management process
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3 Introduction Risk regarding the possibility of loss can be especially problematic If a loss is certain to occur: When there is uncertainty about the occurrence of a loss: The risks we will primarily discuss involve those where there is only the ___________________.
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4 The Burden of Risk Risks surrounding potential losses create significant economic burdens for businesses, government, and individuals Billions of dollars are spent each year to finance potential losses Risk of loss may deprive society of services judged to be too risky
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5 The Burden of Risk An entity’s cost of risk is the sum of Mathematically:
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6 FIGURE 1-1 Types of Risk
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