Are you Struggling with searching risk management process steps, Now you are in right place. Risk Management and Process Naturally, ‘risk’ and ‘management’ consist of two words. So the term risk management needs to have an idea about the significance.
But the meaning of those two words is so wide that it is superfluous to describe them here. So here is a brief description of ‘risk management:
In this article, we briefly discuss Define risk management. Define risk management and risk management process steps. Risk Management Steps Process of Risk Management There are usually three steps in risk management.
The steps are as follows, What are the risk management measures? What is the process of step risk management? let’s see –
First of all, the two words to take the concept of risk management, different authors of risk have said almost the same thing that risk is the uncertainty of financial.
Second, management is a successful process through which an initiative can be made successful or an objective can be achieved or implemented, as well as an activity can be accomplished.
Thus, in the light of the above definition of risk and management, the process by which risk identification, risk information loss is calculated, the amount of risk can be avoided or reduced by dealing with risk is called risk management.
Definitions of risk management:
According to William and Keynes, “Risk management refers to the reduction or impact of risk through risk identification, measurement and control at minimal cost. ”(Risk management may be defined as the minimization of adverse effects at minimum cost through its identification, measurement and control.)
B. M. R. According to Green, “Risk management is the specific part of business management that deals with insurable risks and devises or determines the best way to deal with them. Risk management may be defined as the function of executive leadership in the handling of specified risk facing business enterprises.)
Finding or discovering the sources from which damage may arise. If a loss occurs, evaluate how much of an impact it has on an organization or individual. 3 Select the most effective and efficient way to deal with the risk.
Some risks are insurable and the rest are insurable, why?
In this topic, we discuss Some risks are insurable and the rest are insurable, why? Uncertainty creates risk, and different types of risks exist in an organization
Some risks are Insurable and Rest are Non – Insurable, Why? Risks exist in every business organization. Risk arises from uncertainty. Some of the risks arising from uncertainty are manageable by human effort and some risks are manageable by human effort only those risks that are controllable and measurable and those risks which are avoided or reduced through planned measures are only insurable.
Again the risks that are not controllable and measurable or the potential river risks that are reduced are not insurable. In other words, all the risks that are beyond human control are not insurable. Do BCC. The risks are not insurable.
The insurable risks are as follows:
2. Personal Risk
3. Law relating to liabilities of risk
The irreparable risks are as follows:
2. Political risk
3. Production risk
Any risk is called an insurable risk only if the risk meets the following conditions:
1.If the potential damage is reasonably permissible.
2. If the damage can be measured accurately.
3. If the damage does not arise from an uncontrollable sudden danger.
4. If the loss is out of the control of the accessory and the insured. The above conditions only cover property risk, personal risk, and legal liability risk so they are insurable.
But market risk, political risk and production risk do not meet the above conditions. Because no one has control over them, they are not insurable.
So finally we can say in the context of the above discussion that some risks are insurable and the rest are not insurable. .
What is the retention of Risk?
the amount of risk depends on the nature of the transaction. Institutions or businesses that try to accept a risk without trying to avoid it are therefore risk-averse.
Usually, when the amount of risk is small, the risk manager decides to avoid it and keep it in the business. Risk-taking can usually be done in two ways:
a. Direct or active risk holding;
B. Containing indirect or passive risk.
If the risk is to be borne by the transaction in spite of knowing that there is a definite risk in that matter, then that risk is called direct or active risk-bearing.
Again, if the existence of risk can never be identified, then that risk must be borne in the transaction. This risk is called indirect or passive risk. are you understand now What is meant by risk-taking? What is the retention of risk?
Is retent of Rational Risk for a Business?
It is not reasonable for a business organization to take both direct and indirect risks. There are some risks that have to be taken despite the uncertainties. Direct risks are reasonable but indirect risks are not reasonable at all.
This is because, in the case of direct risk holding, the risk manager can take various alternative measures to avoid it from being alert. But it is not at all reasonable to assume that no risk mitigation measures can be taken in the case of indirect risk. Indirect
If a financing policy is adopted, it can cause serious losses to the business. So it is more reasonable to trade direct risk than indirect risk. If any one of the following losses exists in the business, it would be reasonable for the business to take direct risk:
A. If the risk cannot be transferred to someone else.
B. Can be borne as current executive costs.
C. If the value of the loss determined for maximum single loss or risk protection is lower and if the probability of normal loss is less then the cost of transfer is higher than the moderate loss.
D. If the business controls some of the individual or invisible risks, it is important to anticipate those risks in advance, which may prevent the business from adopting protective measures.
E. If the company has sufficient capacity to easily monitor and inspect risky matters.
F.If the trader believes the premium of the insurance company is less than the estimated loss.
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