Page 141 - RISK Management IC 86

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the charging of losses to current operating costs. In a
large diversified organization composed of a number of
profit centres, the monthly and yearly cash flows of the
individual operating units are likely to vary more than the
net cash flow for the group.

Therefore, risks which individual profit centres themselves
cannot afford to handle as operating costs nor could deal
with creating an internal fund can seek the advantage of
the group contingency fund. Flexibility can be allowed to
each profit centre to contribute according to its current
financial circumstance.

Ans.b) The contingency fund should be strictly adhered to. There
should not be any withdrawal or transfer of money from
the fund. It should be noted that all guidelines are followed
keeping in mind all probable and unexpected losses.

The fund transfer or withdrawal should be an absolute
no-no and several financial consultants should handle the
fund to reap in maximum financial returns.

The financing of the fund solely from the contributions
based on loss expectancies involve the risk of it proving

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