Page 256 - RISK Management IC 86

Risk Management

(ii) Interrelationships and interdependencies between
various parts of the organization.

(iii) the breakdown of the organisation into individual profit
and cost centres.

(iv) the people with the authority to participate in making
and implementing risk handling decisions or those
who may be able to help in providing technical or
other information to the risk manager.

(v) any organisational weaknesses which may enhance
the risk situations.

Q6. Discuss the pros and cons of buying commercial
insurance from the point of view of a corporate
firm.

Ans. Purchase of insurance cannot dispensed with by a
corporate enterprise alone. There are several factors to
be considered while purchasing insurance. If the risk has
very low loss potential, then the premium required to cover
the insurer's administration costs makes insurance
uneconomic.

In the case of risks with high frequencies of occurrence
and low loss severities, insurance becomes uneconomic
as the premium paid to insurers exceed the petty expenses.

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