This document provides an overview of risk management concepts. It defines risk as the possibility of loss or uncertainty of return. Risks are classified as either pure risks, where there is no possibility of profit only loss, or speculative risks, which can result in either profits or losses. Pure risks can be managed through insurance principles like indemnity and subrogation. Speculative risks include business, market, credit, and environmental risks. The key aspects of risk management are risk avoidance, diversification, risk transfer, and risk sharing. The risk management process involves identifying objectives, risks, evaluation, selection of policies, development of strategies, and organizational control.

1. Risk Management: A Conceptual FrameworkB.V.Raghunandan,SVS College,Bantwal-Karnataka-India

2. Meaning of RiskRisk is defined as possibility of lossLico Reis, ”Degree of uncertainty of return on an asset”Investopedia (www.invetopedia.com), ”The chance that an investment's actual return will be different than expected”.

3. Classification of Risks

4. A] Pure RiskIt is a risk where there is no possibility of profitThere is the expense in the form of insurance premiumThere is a loss when the compensation paid by insurance company is less than the actual lossIt is a method of dividing the risk among those exposed to a particular type of risk

5. B] Speculative RiskSpeculative risk not only attempts to compensate for the loss, but may also bring in a profitFinancial risk management tools may bring in profit apart from covering the risk

6. A] Pure Risk ManagementLife Insurance and General InsuranceLife Insurance Principles: Utmost Good faith, and Insurable InterestGeneral Insurance Principles: - Utmost Goodfaith -Insurable Interest -Indemnity -Subrogation -Contribution

7. Types of Pure RisksRisks relating to physical assetsRisks relating to human assetsRisks relating to liability

8. B] Speculative RisksBusiness RiskDefault RiskMarket RiskLiquidity RiskCredit RiskExchange RiskFinancial RiskExternal Environment RiskEnvironment RiskAttrition RiskManufacturing RiskRisk of Natural Calamity

9. Handling the RiskRisk ManagementRisk Retention

10. Risk Management: ActionRisk AvoidanceDiversificationSpin-offRisk TransferRisk SharingFighting Fire with Fire

11. Risk Retention: AcceptanceRationale: 1. When it can not be avoided 2. High cost of management of risk 3. Risk management may increase loss 4. Where control is difficult 5. Where risk management is too complex

12. Risk Management Process: Steps InvolvedIdentification of Objectives: competition, stability in earnings, meeting customer expectation, treasury management, cost control, protecting foreign marketsIdentification of RisksEvaluation of RiskSelection of PolicyDeveloping StrategyOrganisational AuthorityOrganisational Control & Corrective Action

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