This 5-day course on risk management and insurance from May 11-15, 2015 aims to familiarize participants with basic concepts. The objectives are to provide background on risk management and help participants identify exposure to losses, choose risk techniques, and create a risk management plan. The document introduces risk and insurance, how insurance works by pooling risks, and the history and functions of insurance to eliminate risks and spread them among a community. It also defines key components of a risk management framework, including risk strategy, governance structure, protocols, and policies to support the risk management process.

1. Risk Management & Insurance
May 11 – 15, 2015
OCDI – Facilitator: Tonderayi Chikanda

2. Course Objectives
 The aim of this course is to familiarize participants with the basic concepts of risk
management and insurance.
 Its purpose is to provide participants with background information on risk
management so they can be aware of the exposure to losses, choose the right
techniques and be able to prepare a risk management plan.

3. Introduction to Risk Management &
Insurance

4. Risk and Insurance
 People seek security implying that a sense of security
may be the next basic goal after food, clothing, and
shelter.
 An individual with economic security is fairly certain
that he can satisfy his needs (food, shelter, medical care,
and so on) in the present and in the future.
 Risk is the possibility of losing economic security. Most
economic risk derives from variation from the expected
outcome.

5.  Historically, economic risk was managed
through informal agreements within a defined
community.
 If someone’s barn burned down and a herd of
milking cows was destroyed, the community
would pitch in to rebuild the barn and to
provide the farmer with enough cows to
replenish the milking stock.
 This cooperative (pooling) concept became
formalized in the insurance industry.

6. How Insurance Works
 Insurance is an agreement where, for a stipulated
payment called the premium, one party (the insurer)
agrees to pay to the other (the policyholder or his
designated beneficiary) a defined amount (the claim
payment or benefit) upon the occurrence of a specific
loss.
 This defined claim payment amount can be a fixed
amount or can reimburse all or a part of the loss that
occurred.

7.  The insurer considers the losses expected for the
insurance pool and the potential for variation in order
to charge premiums that, in total, will be sufficient to
cover all of the projected claim payments for the
insurance pool.
 The premium charged to each of the pool participants
is that participant’s share of the total premium for the
pool.
 Each premium may be adjusted to reflect any 3
special characteristics of the particular policy.
 As will be seen in the next section, the larger the
policy pool, the more predictable its results.

8. History and Functions of Insurance
 The history of insurance describes the development of the
modern business of insurance against risks, especially
regarding cargo, property, death, automobile accidents,
and medical treatments.
 The industry helps to eliminate risks (as when fire insurance
companies demand the implementation of safe practices and
the installation of hydrants), spreads risks from the individual
to the larger community, and provides an important source of
long-term finance for both the public and private sectors.
 The insurance industry is generally profitable and provides
attractive employment opportunities for white collar workers.

9. THE FRAMEWORK,….
 It refers to a set of components that provide the
foundations and organizational arrangements for:
 Designing, implementing, monitoring, reviewing and
continually improving risk management throughout the
organization”.
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10. The Framework…
 “Is a set of components that provide a structure that will
facilitate the use of a consistent risk management
process.”
 “It is a set of components that support and sustain risk
management throughout an organisation” (ISO,2009).
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11. Framework…
 Risk management framework supports the risk
management process.
 Therefore, it must first be established before starting to
conduct the risk management process.
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12. Components of Risk management framework:
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13. RISK STRATEGY,….
Risk strategy-
 Documents statements of the overall
philosophy.
 Commitment, appetite, attitudes, intentions,
and direction of an organization related to risk
management .
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14. RISK GOVERNANCE STRUCTURE…
 This is a risk management structure also known as
risk management architecture,
 It defines role, responsibilities of organs, officials and
every employee in the organization.
 It also outlines the communications and reporting
structure within the organization.
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15. Risk Management Protocols,…
 Risk management protocols represent the risk
management procedures which define:
 The risk management guidelines rules and procedures,
 Risk management methodologies, tools and techniques
that should be used in the organization.
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16. Risk Management Policy…
 The components discussed earlier supports risk mgt
process,
 Point to remember
 Risk management process is as a systematic application of
management policies, procedures and practices.
 To the activities of communicating, consulting, establishing the
context, and identifying, analyzing, evaluating, treating,
monitoring and reviewing risk.
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17. QUESTIONS

18. WITH THANKS