Page 221 - RISK Management IC 86

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occurrence of the chances of loss producing events
or limiting the severity of the losses. Here one is to
identify the conditions that bring about loss
producing events or increase their severity. The risk
manager has to use his common sense as well as
seek technical expertise from technical experts to
develop the control measures.

(iii)Risk financing -risk financing deals with the manner
in which the risks remaining after his control
measures have been implemented, shall be financed.
In the long run the organisation has to pay for its
own losses. So the primary objective of risk financing
is to spread the risk for evenly over time to reduce
the financial strain and possible insolvency which
the random occurrence of large losses may cause.
The second objective is to minimise the risk costs.

Essentially an organization can finance its risk costs in
three ways:
(a) losses may be charged to current operating costs

as and when they occur.
(b) Prevention may be made for losses either through

purchase of insurance or by building up a
contingency fund.

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