Page 17 - RMAI BULLETIN Jan - Mar 2020

RMAI BULLETIN JANUARY TO MARCH 2020

Continued from last issue

RISK MANAGEMENT

SYSTEM MUST

PREVAIL IN INDIAN

INSURERS’ MARKET

Anabil Bhattacharya
OPERATIONS Risk Inspecting Engineer & Insurance Counselor,
B.M.E. (Honours), F.I.I.I.,

E National Insurance Co. Ltd., KOLKATA.
Retired Chief Manager, H.O.,

E TheJobofRiskManager: Table 1 Risk Management Matrix

The job of risk management starts with the selection of
Type
appropriate method for handling various exposures.
ofLoss Frequency Severity AppropriateRisk
ofLoss
ofLoss
Management
Before selecting the method, the risk management can
Technique
be broken down into three elements which follow each
1 Low Low Retention
otherinalogicalsequence:
- Riskassessmentwithriskmapping 2 High Low LossControl
andRetention
- Riskcontrol
3 Low High Insurance
- Riskfinancing
4 High High Avoidance
Insurance
All the three are inter-related. Because of the
conditions under which firms operate change, the risk
As can be noticed, for the purpose of selection of the
managementprocesshasnecessarilytobedynamic.So method for handling losses, both severity and
in all the three elements of the process there has to be
frequency of loss have to be considered. When the
continuing re-assessment and monitoring of the
frequency and severity of loss are low, (that is, where
results.
thelossissmallandoccursinfrequentlysuchaslossofa
cheaptransistorradiointhehouseorlossofthetypist’s
Selection of appropriate methods for handling losses
dictionary in the office) retention is the most
withriskmanagementmatrix:
appropriateriskmanagement technique.
For the purpose of determining the appropriate
When the loss frequency is low and severity is high
technique(s) for tackling losses, a matrix has been
(third type of loss exposure in the table), the most
suggested. The matrix classifies the various loss
appropriate technique to choose is insurance.
exposuresonthebasisoffrequencyandseverity.
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