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Risk Management

specific questions. Probability distributions can also help
determine whether to accept a deductible. The Risk
Management specialist can determine :
(i) Whether the firm is willing to accept the probability

that the retained losses will exceed the premium saved
by purchasing the deductible.
(ii) He can determine whether the elimination of the worry
about the losses is worth paying the amount by which
the premium savings exceed the average retained loss.

Probability distributions can also determine whether the
effect of loss prevention measures on the potential losses
faced by the firm is worth the involved expenditures.

Q2. Describe the step by step method of formulating
risk management program in a corporate
enterprise.

Ans. Regardless of the type of companies and the type of
management, it is highly desirable that there be an overall
corporate risk philosophy is agreed upon and a set of
policies be adopted for handling of all the risks.

There are several steps to be followed while formulating
the risk management, they are :

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