Page 19 - RMAI BULLETIN Jan - Mar 2020

RMAI BULLETIN JANUARY TO MARCH 2020

iv. Humanresourceslossexposures- Figure 2
1. Deathordisabilityofkeyemployees; Process of risk management
2. Retirementorunemployment;
3. Job-related injuries or diseases experienced by Determination of risk management objectives
workers.
Identify potential losses
v. Crimelossexposures-
Evaluate/assess potential losses
1. Holdups,robberies,burglaries;
2. Employeetheftanddishonesty;
Select the appropriate technique for
3. Fraudandembezzlement; treating loss exposures
4. Internetandcomputercrimeexposures. 1. Risk Control
l Risk avoidance
vi. Employeebenefitlossexposures- l Loss control
1. Failuretocomplywithgovernmentregulations; 2. Risk Financing
l Retention
2. Violationoffiduciaryresponsibilities;
l Non-insurance transfers
3. Group life and health and retirement plan l Commercial insurance
exposures;
4. Failuretopaypromisedbenefits. Implement and administer the program

vii. Foreignlossexposures- Evaluation and review
1. Plants,businessproperty,inventory;
Evaluation of potential losses and risk
2. Foreigncurrencyrisks;
assessment:
3. Kidnappingofkeypersonnel;
Subsequent to identification of risk, the next step in the
4. Politicalrisks.
risk management process relates to analyzing,
evaluating and measuring the impact of losses on the
Changes taking place in industries that create new loss
individual or corporate unit by estimating the potential
exposures must be followed. Important issues of risk
frequency and severity of losses. While frequency of
management include rising costs of litigation,
loss relates to the probable number of particular losses
increasing costs of workers compensation and risk
that may occur during some given period of time,
financingthroughaccessingcapitalmarkets.
severity of loss refers to the probable magnitude of
lossesthatmayoccur,iftheyoccur.
TheProcessofRiskManagement:
A scientific approach to risk management of pure risks This will enable ranking of various loss exposures
according to their relative importance. A loss potential
involvesalogicalsequenceofthefollowingsixsteps.
that is small even though frequent, is much less
important compared to potential loss exposures that
are infrequent (such as destruction of a factory by
devastating fire or accidental deaths) but has a
potential for bankruptcy. Thus, though both frequency
and severity have to be considered in the risk
management process, severity of course, is
substantially more important. It is possible that a firm
may become bankrupt by a single catastrophic loss –
the size of the loss from a single event can be truly
crippling. In the risk management process, it is
therefore necessary for estimating maximum probable
loss and maximum possible loss. The maximum
probable loss is an estimate of the worst loss that is

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