Page 186 - RISK Management IC 86

Risk Management

It should be appreciated that the costs of accidental
losses can be equated with the costs of raw materials,
labour or other overheads. So just as cutting the
costs of raw materials or label or other expenses
adds to profits, reducing the costs of accidental
losses can also add to the profit.

(ii) indirectly, effective risk management also
contributes to increase the revenue. The cost of
accidental losses and the insight into regarding such
losses may act as a deterrent to management to
commit capital to otherwise potentially profitable
new ventures.

The risk manager is then able to identify the pure
risks involved in the new venture, such as majors
to control these risks so that the costs of accidental
losses are reduced.

Q5. Describe the three methods of transfer of risks
and discuss the issues involved in each method.

Ans. There are three methods of risk transfer. They are:
(i) risk reduction advisory and inspection services -
these services are provided by the insurers as part

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