Page 149 - RISK Management IC 86

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Q.8.b) What are the risk attitudes of the following:

(i) Joint Stock Companies - Joint Stock Companies can
be further divided into single product and multi product
companies, national and multi-national companies, etc.

Typically, multinational companies operate as
conglomerates in which the operational responsibility is
delegated by the holding company to various divisions
and subsidiaries. Mostly the latter operate as independent
units, and under such circumstances, the risk management
is usually handled in accordance with the corporate
objectives laid down by the board of the holding company.

For some single product multinational companies, where
the products are sold worldwide, close central control
over many elements of the business is essential, for e.g,
pricing, competitors pricing, quality assurance, marketing
and advertising, manufacturing, distribution etc.

Such companies, may share the same attitudes to risk
and corporate objectives, but by centralizing the risk
management function it will probably be willing to
retain a relatively large loss for its own without resorting
to insurance.

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