Risk Management - 11/29-Risk Management Define r isk and...

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11/29-Risk Management Define risk and the general strategies used to manage it. Understand the basic concept and rules of insuring against risk -Know what is insurable and what is no -Understand the Rule of Indemnity -Know what is meant by The Law of Large Numbers , and how it’s used to calculate risk. Types of Risk Pure Risk: the potential for loss with no potential for gain, (walking across a street, either happens or doesn’t.) Speculative Risk: Potential for Loss with the Possibility for gain (e.g. buying stocks, etc.) Our Exposure to Pure Risk : accidental death/injury, losses to natural disasters, being sued, being robbed, etc. 4 Ways to Manage Risk : avoid exposure to risk—if you can, but if you cant you can… -Reduce the risk to minimize loss, (through education, regulation, technology, not being stupid etc.) -Transfer risks to someone else, by buying insurance. -Self-insure, i.e. absorb the $$ loss, ( all or in part through your “deductable”), the higher your deductable, the less your insurance premiums. Criteria to be Insurable
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This note was uploaded on 10/03/2011 for the course BUSINESS 111 taught by Professor Schloemer during the Spring '11 term at Miami University.

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Risk Management - 11/29-Risk Management Define r isk and...

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