Risk Response control

1. Topic: Risk Management and Insurance
Course Name: Introduction of Business
Course Code: BUS101
Prepared By:
Ria Mahjabin
Dept-BBA
Id-15102045
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2. INTRODUCTION OF INSURANCE
 Insurance is a means of protection from financial
loss.
 It is a form of risk management primarily used to
hedge against the risk of a contingent, uncertain
loss.
 An entity which provides insurance is known as
an insurer, insurance company, or insurance
carrier. A person or entity who buys insurance is
known as an insured or policyholder. 2

3. ELEMENTS OF INSURANCE
Insurer:
The party (i.e. insurance company) which undertakes to protect the insured
from the specified risks and the loss so caused in consideration to a certain
premium received from the insured is known as insurer.
Insured
The person or party who seeks protection against a particular risk and pays
a certain amount in consideration to the recovery of the financial loss is
known as insured.
Premium
It is the fees paid by the insured to the insurer as the consideration of the
insurance contract for the assurance of the recovery of financial loss so
caused. 3

4. ELEMENTS OF INSURANCE
Insured amount
It is the agreed financial value of the future loss caused by certain
events. Insurance is made for the recovery of this value.
Insurance policy
It is the contract between the insured and the insurer containing the
details of the terms and conditions of a certain insurance.
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5. REQUIREMENTS OF AN INSURABLE RISK
There are six general requirements:
1. Large number of exposure units
2. Accidental and unintentional loss
3. Determinable and measureable loss
4. No catastrophic loss
5. Calculable chance of loss
6. Economically feasible premium
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6.  Assures for financial compensation
 Reduction of risks
 Encouragement to saving and investment
 Basis of credit
 Maintains economic stability
 Promotes business activities
 Provides employment opportunities
Advantage of Insurance
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7. DISADVANTAGES
 Insurance leads to negligence as the insured feels that he/she
can be compensated for any loss or damage.
 Insurance companies do not make the compensation promptly
on maturity of the policy or for the financial losses as the
expectation of the insured.
 It may lead to the crimes in the society as the beneficiaries of
the policy may be tempted to commit crimes to receive the
insured amount.
 Although insurance encourages savings, it does not provide
the facilities that are provided by bank. 7

8. RISK MANAGEMENT
 “The process involved with identifying, analyzing,
and responding to risk.
 It includes maximizing the results of positive risks
and minimizing the consequences of negative
events”
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9. WHY DO WE MANAGE RISK?
 Project problems can be reduced as much as 90% by
using risk analysis.
 Positives:
 More info available during planning.
 Improved probability of success/optimum project.
 Negatives:
 Belief that all risks are accounted for.
 Project cut due to risk level.
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10. HOW DO WE MANAGE RISK?
 Use the ten risk management processes……
 Risk Management Planning
 Risk Identification
 Qualitative Risk Analysis
 Quantitative Risk Analysis
 Risk Response Planning
 Risk Monitoring and Control
 Probability and Impact Matrix
 Stakeholder tolerances
 Reporting formats
 Tracking 10

11. RISK MANAGEMENT PLAN
 Methodology – Approach, tools, & data.
 Roles & Responsibilities.
 Budgeting – Resources to be put into risk management.
 Timing – When and how often.
 Risk Categories – Risk Breakdown Structure (RBS).
 Definitions – Risk probabilities and impact.
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12. QUANTITATIVE RISK ANALYSIS
 Analyze numerically the probability and consequence
of each risk.
 Monte Carlo analysis popular.
 Decision Tree analysis on test
 Diagram that describes a decision and probabilities
associated with the choices
 Expected Monetary Value Analysis (EMV).
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13. STRATEGIES FOR HANDLING RISK
 Negative Risks (or Threats)
 Avoid
 Transfer
 Mitigate
 Acceptance
 Positive Risks (or Opportunities)
 Exploit
 Share
 Enhance
 Acceptance
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15. RISK MANAGEMENT SUMMARY
 Risk Management Planning – New
 Risk ID – Develop categories & types
 Risk Qualitative – Probability & Impact Analysis
 Risk Quantitative – Decision Tree, EMV, Monte Carlo
 Risk Response – Mitigation & contingency plans
 Risk Monitoring and Control – Recurring evaluations
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16. CONCLUSION
 In the world, risk is present in each and every work
and we can not totally remove it but insurance can
help us to overcome from risks and its losses.
Insurance provides financial assurance which helps
the investors to be secured with their invested money
and also inspires them to invest money in many
sectors. Insurance helps a country to be developed
with financial security and also with other things.
Though it has some disadvantage, it is helpful for all
kinds of business. So, it can be said that it is the key
of successful business.
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