Page 214 - RISK Management IC 86

Risk Management

the uncertainty of risk, though at the cost of a
premium.

This leads to three conclusions : (i) Firm seeking to
maximize short term profit, regardless of risk, would
not spend on loss prevention or on insurance. (ii) If
the objective of the firm is to maximize the expected
profit, then any expenditure on loss prevention is
worth undertaking. (iii) If the firm is prepared to
forego some profit in order to achieve more stable
earnings, then the firm can consider purchase of
insurance.

(c) Monitoring and review of risk management - in an
ideal situation, once the controllers of an organisation
had formulated their risk management objectives and
translated them into a set of policies which have
been implemented, could mean the end of risk
management process. Practically however this does
not happen.

Corporate controllers may change their attitudes to
risk, either of their own free will, or by force of
circumstances. Risk conditions, to change over time,

Sashi Publications - www.sashipublications.com 215

Copyright@ The Insurance Times. 09883398055 / 09883380339