Page 21 - RMAI July-September 2018

July - September 2018

Managing The Risk and Business Insurance

“All that's bright must fade –
The brightest still the fleetest;
All that's sweet was made
But to be lost when sweetest.”

_Thomas Moore
Lajpat Ray Chandnani

The advancement of technology, the multiplicity of Hazard, or condition which increases the likely
activities and our growing interdependence make frequency or severity of loss. (v) Property or person
larger and larger disasters inevitable. Progress has put exposed to loss, (vi) Potential rupee amount of loss.
more people, more companies at risk than even (vii) Variations in actual losses. (viii) Probability that
before. Traffic multiplies on the roads, in the air and at actual losses will vary from expected losses. (ix)
sea. The disasters cause death or hardship for many Psychological uncertainty concerning loss. (x) Concise
more people and properties than those directly Oxford Dictionary: Risk, hazard, chance of bad
involved. The most sophisticated modern machinery consequences, loss etc., ; exposure to mischance (xi)
can break down. Defective goods can cause injury. Chamber's English Dictionary: Risk: hazard, danger,
Mistakes do happen and accidents can kill or main chance of loss or injury, the degree of probability of
employees and general public. Profits, customers and loss, a Person, thing or factor likely to cause loss or
goodwill can be lost. No one is safe from thefts. No danger (xii) ISO 31000 - standard prescribed by the
building is safe from Fire. No business is immune from International Organization for Standardization
one or the another risk………. defines "Risk" as the effect of uncertainty on
CONCEPT OF RISK : objectives, whether positive or negative.
Jawaharlal Nehru once wrote : “People avoid action RISK AND BUSINESS :
often because they are afraid of the consequences for Identifying and Analyzing Los Exposures :
action means risk and danger.” He added that “while
Recognizing the numerous kinds of hazards that can
these results seems terrible from a distance, they are lead to unexpected losses is not as simple as it may
not so bad if one looks closely. And often risk is a appear. Unless one has already experienced a loss,
pleasant companion, adding to the zest and delight of
one may not even recognize certain loss exposures. If
life. Most people, however, do not regard risk so one has not experienced a fire, for example, he may
kindly and seek to cope with it effectively. Risk is not realize how much damage can be done by the
universal, present in all things, all lives, inherent in
water from the fire hoses or how much business may
being. The concept of a person free from risk is as be lost during the time required to get things back to
theoretical as the concept of perfection……….” normal.
RISK, DEFINED : Identifying and analyzing loss exposures involves

Risk is objective uncertainty of financial loss that is to examining a firm's operations and repeatedly
say anything that endangers present or future assets asking….
of a firm. William Lawrence defined the Risk as “Risk I. What can cause a loss here ? (Identifying an
is the compound estimate of the probable frequency, exposure), and
severity and public perception of harm.” Some
II. How serious might that loss be? (Analyzing the
common definitions are :
exposure).
(I) Possibility of loss or exposure to loss, (ii) Probability
To be logical and complete any procedure for
or chance of loss, (iii) Peril which may cause loss, (iv)
identifying and analyzing loss exposures should taken

20 RISK MANAGEMENT ASSOCIATION OF INDIA