Page 257 - RISK Management IC 86

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It is when the loss experience is subject to large
fluctuations, and maximum losses exceed a tolerable level,
then it is worth purchasing insurance. Tolerable level
depends on the organisation's financial status, wealth, cash
flow, liquidity etc.

So we see, the following factors influence the
purchasing decision :
(i) potential size and frequency of loss
(ii) size of premium loading
(iii) value placed upon financial certainty
(iv) Services provided by insurers

Q7a) Explain the role of general management in risk
management.

Ans. Risk management is the ultimate responsibility of general
management. All risk management activities must have
the support of top management.

This can be achieved by giving recognition to the status
and function of risk management in the organization,
through the formulation of a written statement of risk
management policy.

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