Page 220 - RISK Management IC 86

Risk Management

(b) Risk evaluation - risk evaluation has two steps - (i)
the assessment of the probability of loss occurring,
and (ii) its severity.

It is not sufficient just to know that an organisation owns
or is responsible for the property that is exposed to
damage by fire, explosion, wind storm, flood, or any
other perils, or its products in that it produces or sells
which could cause injury or damage. The formulation
of sensible decisions about the way such risks should
be handled also requires information regarding values at
risk or potential liabilities, and the estimated frequency
of losses of different sizes, including losses caused by
interruption to business.

Only with such information is at hand, its possible to
judge the cost effectiveness of spending on risk reduction
or risk retention or risk insurance. In case of risk,
insurance premium should be an acceptable price to pay
for the risk transfer. Risk evaluation is one of the most
difficult part of risk management process.

(ii) Risk control - risk control covers all those measures
aimed at avoiding, eliminating, or reducing the

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