It is a variable of actual loss from excepted loss.
Based on persons mental conditions or state of mind.
CHANCE OF LOSS Defined as probability that event can occur. Divided into two types: Objective Probability Subjective Probability Objective Probability: long run relative frequency of an event based on the assumption of an infinite no. of observation and there is no change in underline conditions .
It is individual personal estimate of the chance of loss.
Retention : It means that the firm retains part or all losses that can result from a given loss. It can be either active or passive.
Noninsurance Transfers: Noninsurance transfers are methods other than insurance by which a pure risk and its potential financial consequences are transferred to another party.
Commercial Insurance: Commercial insurance is also used in a risk management program. Insurance is appropriate for loss exposures that have a low probability of loss but for which the severity of loss is high.
Implement & Monitor the risk management process.
Risk Management Policy Statement: This statement outlines the risk management objectives of the firm.
Risk Management Mannual : It consists of details of risk management program & helps in training new employees .
Co operation with other departments like accounting , finance , marketing , production and human resources.