Utilizing TCOR to identify important KPI's throughout the Enterprise Risk Management Program and mitigate the potential for financial leakage from the bottom line.
This document provides an overview of enterprise risk management. It defines risk and risk management as processes for minimizing unfavorable outcomes at the lowest cost. Enterprise risk management is a common framework that identifies potential risks and manages opportunities to reasonably achieve organizational objectives. It also describes the components of an effective risk management organization, including infrastructure, planning, implementation, control, and maximizing firm value. Key components of risk management are identified as event identification and risk assessment, risk response, information and communication, monitoring, and control activities. An example is provided of risks that led to the bankruptcy of Baring Bank.
FORUM 2013 Entreprise risk management: fact or fictionFERMA
The document summarizes a presentation on enterprise risk management (ERM). It discusses the evolution of risk management from 1993 to 2013, highlighting increasing engagement from executive management and a shift from compliance-driven to value-driven approaches. It identifies top risks facing global companies and the 10 hallmarks of best practice risk management. The presentation examines how insurance can support ERM and areas where risk managers can improve. A maturity index is presented, showing most organizations have developing risk management capabilities.
The document discusses residual risk and alternative risk transfer methods. It defines residual risk as the risk remaining after known risks have been mitigated or eliminated. Various risk mitigation techniques like avoidance, reduction, transfer, and acceptance are described. Insurance is provided as the primary example of risk transfer, allowing individuals and companies to transfer risks to insurers. The document also notes that insurers can transfer risks through reinsurance.
This presentation provides a four-step process to help risk managers evaluate an organization's insurance program strategy. The steps include: (1) creating an insurable risks matrix to categorize insurable and non-insurable risks, (2) analyzing a loss register to identify frequent and under-utilized insurances, (3) calculating a loss ratio to assess performance against benchmarks, and (4) using a risk transfer strategy code to determine options like eliminating, reducing, consolidating or creating insurance policies. The analysis of these steps can guide risk managers in adapting an insurance program to an organization's true risk profile.
This document discusses risk management and insurance. It defines risk management as identifying, measuring, and controlling risks that threaten assets and earnings. The objectives of risk management are to help organizations progress toward goals efficiently. Risk management involves identifying potential losses, evaluating their likelihood and impact, examining risk management techniques, implementing a program, and monitoring it. Techniques include risk control methods like avoidance, prevention, and transfer, as well as risk financing methods like retention, self-insurance, and insurance. The overall process is to select and implement the most cost-effective risk management program.
The document discusses types of risk and risk management strategies. It outlines criteria for risks to be insurable, including being accidental, measurable, and having a calculable probability. It also differentiates between speculative and pure risks. The risk management process involves prioritizing risks, identifying and analyzing them, establishing context, selecting strategies, and monitoring decisions. Key risk management techniques include absorption, prevention, avoidance, and sharing or transferring risks.
This document provides an overview of enterprise risk management. It defines risk and risk management as processes for minimizing unfavorable outcomes at the lowest cost. Enterprise risk management is a common framework that identifies potential risks and manages opportunities to reasonably achieve organizational objectives. It also describes the components of an effective risk management organization, including infrastructure, planning, implementation, control, and maximizing firm value. Key components of risk management are identified as event identification and risk assessment, risk response, information and communication, monitoring, and control activities. An example is provided of risks that led to the bankruptcy of Baring Bank.
FORUM 2013 Entreprise risk management: fact or fictionFERMA
The document summarizes a presentation on enterprise risk management (ERM). It discusses the evolution of risk management from 1993 to 2013, highlighting increasing engagement from executive management and a shift from compliance-driven to value-driven approaches. It identifies top risks facing global companies and the 10 hallmarks of best practice risk management. The presentation examines how insurance can support ERM and areas where risk managers can improve. A maturity index is presented, showing most organizations have developing risk management capabilities.
The document discusses residual risk and alternative risk transfer methods. It defines residual risk as the risk remaining after known risks have been mitigated or eliminated. Various risk mitigation techniques like avoidance, reduction, transfer, and acceptance are described. Insurance is provided as the primary example of risk transfer, allowing individuals and companies to transfer risks to insurers. The document also notes that insurers can transfer risks through reinsurance.
This presentation provides a four-step process to help risk managers evaluate an organization's insurance program strategy. The steps include: (1) creating an insurable risks matrix to categorize insurable and non-insurable risks, (2) analyzing a loss register to identify frequent and under-utilized insurances, (3) calculating a loss ratio to assess performance against benchmarks, and (4) using a risk transfer strategy code to determine options like eliminating, reducing, consolidating or creating insurance policies. The analysis of these steps can guide risk managers in adapting an insurance program to an organization's true risk profile.
This document discusses risk management and insurance. It defines risk management as identifying, measuring, and controlling risks that threaten assets and earnings. The objectives of risk management are to help organizations progress toward goals efficiently. Risk management involves identifying potential losses, evaluating their likelihood and impact, examining risk management techniques, implementing a program, and monitoring it. Techniques include risk control methods like avoidance, prevention, and transfer, as well as risk financing methods like retention, self-insurance, and insurance. The overall process is to select and implement the most cost-effective risk management program.
The document discusses types of risk and risk management strategies. It outlines criteria for risks to be insurable, including being accidental, measurable, and having a calculable probability. It also differentiates between speculative and pure risks. The risk management process involves prioritizing risks, identifying and analyzing them, establishing context, selecting strategies, and monitoring decisions. Key risk management techniques include absorption, prevention, avoidance, and sharing or transferring risks.
Risk management is important for startups as only 44% survive more than 4 years. It involves understanding the likelihood and impact of risks, and mitigating them in a cost-effective way. There are four categories of risk: ignorable risks with minor consequences; nuisance risks with small impacts addressed through behavior changes; insurable risks covered by insurance; and "company killers" with high likelihood and major impacts. Examples of risks include lack of client diversification, market risks from not understanding customers, product risks if not prioritized, and financial risks if milestones are unclear. A full risk management process identifies, analyzes, evaluates, plans responses for, and monitors risks.
This document discusses various methods for handling risks:
1) Loss control methods seek to reduce the frequency and severity of losses through prevention and reduction techniques.
2) Loss financing methods obtain funds to pay for losses, such as retaining risks, self-insuring, purchasing insurance, or hedging against losses.
3) Internal risk reduction methods involve diversifying business activities to reduce risk exposure or investing in information to better forecast potential losses.
Risk management seeks to address uncertainty and risks that may hinder an organization from achieving its goals. It involves identifying potential risks, evaluating their likelihood and impact, examining options to manage the risks, selecting and implementing a risk management program, and reviewing the program. The goal is to preserve the organization's ability to function and protect employees from harm, while reducing utilization of resources and negative effects of risks.
This document discusses risk management and provides guidance on implementing an effective risk management process. It addresses common challenges like complexity, bias, and skepticism. The key messages are:
1) Risk management is a simple process that involves identifying, assessing, planning for, and managing risks. When applied with common sense, it should be part of routine project management.
2) An effective risk management process provides benefits like informed decision making, understanding risk exposure, and early warning of problems.
3) Risk management is a positive activity aimed at supporting stakeholders, not an ineffective overhead. It deserves consideration on all but the simplest projects.
Noon-12.30pm
Risk Dollarisation® — A groundbreaking approach to non-financial risk
Jillian Hamilton — Managing Director, Manage Damage
Jillian saw the need to approach safety and risk in a new way.
The result is Risk Dollarisation® where the true cost of business risk is quantified by its damage cost which creates an environment where it is marked, measured and managed.
Risk Dollarisation® is a New Language; it is clear, transparent and accurate; it is quantifiable and measurable in dollars; it has assignable costs and Business Units/Individuals are held to account for costs.
BUY THE BOOK www.managedamage.com/book
This document summarizes the key concepts of enterprise risk management. It discusses how risk management aims to help organizations achieve their mission and avoid surprises by dealing with uncertainty. The risk management process involves identifying potential risks, evaluating and prioritizing them, selecting risk management techniques, and monitoring risks. The roles of the board, senior management, and risk management committee in the risk management process are also outlined.
Risk retention, noninsurance transfers, and insurance each have advantages and disadvantages for managing risks. Retention saves money but could lead to higher losses. Noninsurance transfers may cost less than insurance but contracts could be ambiguous. Insurance reduces uncertainty and provides services, but premiums are a major cost. The optimal risk management approach considers each option's pros and cons.
This document classifies and defines different types of risk:
1. Systematic risk includes market risk, interest rate risk, and purchasing power risk which stem from overall market forces outside a company's control.
2. Unsystematic risk is specific to an individual company and can result from business risks like poor management or technological changes, or financial risks from using debt.
3. Risk is associated with the variability and uncertainty of investment returns. Expected return considers the probability weighted average returns from all possible outcomes, while risk is measured by the variance or standard deviation of returns. Both risk and expected return must be examined for investment decisions.
This document discusses various types of risks including:
- Market risk, strategic risk, sales risk, management risk, and budget risk as types of business risks.
- Systematic risk and unsystematic risk.
- Inflation risk, exchange rate risk, interest rate risk, liquidity risk, maturity risk, credit risk, and political risk.
It provides definitions and explanations of these risks. The document also outlines a process for risk management including identifying risks, analyzing them, ranking them, and developing contingency plans for high probability/high impact risks.
Business risk refers to the possibility that a company will have lower than expected profits or experience losses rather than profits. It is influenced by factors like sales, prices, costs, competition, the economy, and regulations. To reduce business risk, companies with higher risk should take on less debt. Investors are also exposed to other risks like financial, liquidity, market, currency, and country risks when investing in a company. Analysts use ratios and statistics to calculate and measure a company's business risk level.
This document discusses different types of risk that businesses may face. It defines risk as uncertainty concerning potential losses and distinguishes it from uncertainty where outcomes are completely unknown. The document then examines several specific types of risk in more detail, including credit risk, asset liability gap risk, interest rate risk, market risk, currency risk, and due diligence risk. It provides examples to illustrate each type of risk and how businesses can potentially experience losses due to these risks. Finally, the document concludes that risk control aims to identify, assess, and prepare for potential hazards and disruptions through approaches like avoidance, loss prevention, and diversification.
This document discusses various techniques for corporate risk financing, including risk transfer through commercial insurance, risk retention using internal funds, and hybrid techniques combining internal and external sources. It provides details on commercial insurance mechanisms and objectives. Key risk financing techniques include insurance, self-insurance through loss reserves, and captive insurance companies owned by an organization to insure its own risks. Choosing an approach involves considering expected losses, financing costs, control, and other factors to select the most cost-effective option.
This document provides an introduction to risk management. It discusses the different meanings of risk and types of risks facing businesses and individuals, including price, output, input price, commodity price, exchange rate, interest rate, credit, pure, legal liability, employee benefits, and personal risks. It also describes the risk management process of identifying risks, evaluating potential losses, and developing risk management methods like loss control, loss financing through retention, insurance, or hedging. The objectives of risk management are to understand the cost of risk, which includes expected losses and costs of loss control, financing, and internal risk reduction. Firms aim to maximize value by minimizing the cost of risk.
An introduction to risk management concepts for future outdoor leaders. It serves up metaphors and poses suitable questions for other forms of risk management.
This document discusses risk and risk management. It defines risk as uncertainty about potential losses and categorizes risks as objective or subjective. It also discusses concepts like chance of loss, perils, hazards, and different types of risks like fundamental risk, particular risk, and enterprise risk. The objectives and steps of the risk management process are also outlined, including identifying exposures, analyzing frequency and severity of losses, selecting risk control or financing techniques, and implementing and monitoring the risk management program.
Enterprise risk management involves identifying risks, evaluating their significance, developing risk management policies, and using techniques to mitigate risks. It is a key part of business management processes and helps organizations anticipate, prevent, monitor, and mitigate risks from sources like the financial markets, business operations, and the external environment. The goal is to optimize risk control, prevention, and retention to create shareholder wealth and manage risks proactively as uncertainties in the business environment continuously change.
Risk managment and Insurance chap1-3 Addis Ababa University School of CommerceAshenafi Abera Wolde
Risk affects every aspect of an organization. The effects of risk are not
confined within any predictable boundaries; a single event can easily
influence several areas of an organization at once, producing consequences
far beyond the immediate impact. The pervasiveness and complexity of risk
presents strong challenges to managers, one of the most important being
the coordination of risk management across areas within the organization.
It deals with: the nature and management of pure risks, insurance and
reinsurance; risk concepts, classification of risks, management of pure risks
through various risk handling tools, industrial safety, general principles of
insurance and major classes of insurance, reinsurance and development &
regulation of the insurance Ethiopia
The document discusses the risk management process, which consists of 5 steps: 1) identifying risks, 2) analyzing risks, 3) prioritizing risks, 4) treating risks, and 5) monitoring risks. It provides details on each step, such as how to identify potential risks, analyze their scope and severity, rank their priority, implement solutions to address risks, and continuously monitor risks. The goal of the risk management process is to reduce threats to an organization's capital and earnings through a systematic, scientific approach.
FCF June 2014 - 02 fraud facts 2 p securing board level support for anti fra...#TheFraudTube
Securing board-level support is critical to establishing effective fraud defenses. The factsheet offers tips for approaching the board, including emphasizing the benefits of investment in anti-fraud measures which can outweigh costs, quantifying the true costs of fraud, and demonstrating returns on investment from prevention. Case studies on a city council and SME show significant returns, with the campaign in Stoke-on-Trent identifying more fraud and recovering more properties than estimated.
The document discusses the total cost of risk (TCOR) and how captives are involved in calculating TCOR. It summarizes a panel discussion on TCOR that explored whether captives properly account for premiums and losses in their TCOR calculations. The panel included a risk manager, actuary, and survey representative who discussed different approaches to calculating TCOR and whether respondents track it. Most audience members did not track TCOR. The document then provides background on TCOR components and discusses three methods for calculating the loss component of TCOR. It also gives an example of how one company calculates and reports TCOR to management, showing captives can significantly impact TCOR calculations.
PECB Webinar: Aligning ISO 31000 and Management of Risk MethodologyPECB
The webinar covers:
• ISO 31000 as the adopted standard, for ISO standards that have risk components, such as ISO 27005 and OHSAS 18001
• Description of Management of Risk (MoR) – how organizations can benefit
• Complementary values that ISO 31000 and MoR bring to each other
• How Risk Managers can evolve a practical approach to carrying out Risk Processes
Presenter:
This webinar was presented by PECB Trainer Orlando Olumide Odejide, an experienced Enterprise Architect and Chief Trainer for Training Heights Limited.
Risk management is important for startups as only 44% survive more than 4 years. It involves understanding the likelihood and impact of risks, and mitigating them in a cost-effective way. There are four categories of risk: ignorable risks with minor consequences; nuisance risks with small impacts addressed through behavior changes; insurable risks covered by insurance; and "company killers" with high likelihood and major impacts. Examples of risks include lack of client diversification, market risks from not understanding customers, product risks if not prioritized, and financial risks if milestones are unclear. A full risk management process identifies, analyzes, evaluates, plans responses for, and monitors risks.
This document discusses various methods for handling risks:
1) Loss control methods seek to reduce the frequency and severity of losses through prevention and reduction techniques.
2) Loss financing methods obtain funds to pay for losses, such as retaining risks, self-insuring, purchasing insurance, or hedging against losses.
3) Internal risk reduction methods involve diversifying business activities to reduce risk exposure or investing in information to better forecast potential losses.
Risk management seeks to address uncertainty and risks that may hinder an organization from achieving its goals. It involves identifying potential risks, evaluating their likelihood and impact, examining options to manage the risks, selecting and implementing a risk management program, and reviewing the program. The goal is to preserve the organization's ability to function and protect employees from harm, while reducing utilization of resources and negative effects of risks.
This document discusses risk management and provides guidance on implementing an effective risk management process. It addresses common challenges like complexity, bias, and skepticism. The key messages are:
1) Risk management is a simple process that involves identifying, assessing, planning for, and managing risks. When applied with common sense, it should be part of routine project management.
2) An effective risk management process provides benefits like informed decision making, understanding risk exposure, and early warning of problems.
3) Risk management is a positive activity aimed at supporting stakeholders, not an ineffective overhead. It deserves consideration on all but the simplest projects.
Noon-12.30pm
Risk Dollarisation® — A groundbreaking approach to non-financial risk
Jillian Hamilton — Managing Director, Manage Damage
Jillian saw the need to approach safety and risk in a new way.
The result is Risk Dollarisation® where the true cost of business risk is quantified by its damage cost which creates an environment where it is marked, measured and managed.
Risk Dollarisation® is a New Language; it is clear, transparent and accurate; it is quantifiable and measurable in dollars; it has assignable costs and Business Units/Individuals are held to account for costs.
BUY THE BOOK www.managedamage.com/book
This document summarizes the key concepts of enterprise risk management. It discusses how risk management aims to help organizations achieve their mission and avoid surprises by dealing with uncertainty. The risk management process involves identifying potential risks, evaluating and prioritizing them, selecting risk management techniques, and monitoring risks. The roles of the board, senior management, and risk management committee in the risk management process are also outlined.
Risk retention, noninsurance transfers, and insurance each have advantages and disadvantages for managing risks. Retention saves money but could lead to higher losses. Noninsurance transfers may cost less than insurance but contracts could be ambiguous. Insurance reduces uncertainty and provides services, but premiums are a major cost. The optimal risk management approach considers each option's pros and cons.
This document classifies and defines different types of risk:
1. Systematic risk includes market risk, interest rate risk, and purchasing power risk which stem from overall market forces outside a company's control.
2. Unsystematic risk is specific to an individual company and can result from business risks like poor management or technological changes, or financial risks from using debt.
3. Risk is associated with the variability and uncertainty of investment returns. Expected return considers the probability weighted average returns from all possible outcomes, while risk is measured by the variance or standard deviation of returns. Both risk and expected return must be examined for investment decisions.
This document discusses various types of risks including:
- Market risk, strategic risk, sales risk, management risk, and budget risk as types of business risks.
- Systematic risk and unsystematic risk.
- Inflation risk, exchange rate risk, interest rate risk, liquidity risk, maturity risk, credit risk, and political risk.
It provides definitions and explanations of these risks. The document also outlines a process for risk management including identifying risks, analyzing them, ranking them, and developing contingency plans for high probability/high impact risks.
Business risk refers to the possibility that a company will have lower than expected profits or experience losses rather than profits. It is influenced by factors like sales, prices, costs, competition, the economy, and regulations. To reduce business risk, companies with higher risk should take on less debt. Investors are also exposed to other risks like financial, liquidity, market, currency, and country risks when investing in a company. Analysts use ratios and statistics to calculate and measure a company's business risk level.
This document discusses different types of risk that businesses may face. It defines risk as uncertainty concerning potential losses and distinguishes it from uncertainty where outcomes are completely unknown. The document then examines several specific types of risk in more detail, including credit risk, asset liability gap risk, interest rate risk, market risk, currency risk, and due diligence risk. It provides examples to illustrate each type of risk and how businesses can potentially experience losses due to these risks. Finally, the document concludes that risk control aims to identify, assess, and prepare for potential hazards and disruptions through approaches like avoidance, loss prevention, and diversification.
This document discusses various techniques for corporate risk financing, including risk transfer through commercial insurance, risk retention using internal funds, and hybrid techniques combining internal and external sources. It provides details on commercial insurance mechanisms and objectives. Key risk financing techniques include insurance, self-insurance through loss reserves, and captive insurance companies owned by an organization to insure its own risks. Choosing an approach involves considering expected losses, financing costs, control, and other factors to select the most cost-effective option.
This document provides an introduction to risk management. It discusses the different meanings of risk and types of risks facing businesses and individuals, including price, output, input price, commodity price, exchange rate, interest rate, credit, pure, legal liability, employee benefits, and personal risks. It also describes the risk management process of identifying risks, evaluating potential losses, and developing risk management methods like loss control, loss financing through retention, insurance, or hedging. The objectives of risk management are to understand the cost of risk, which includes expected losses and costs of loss control, financing, and internal risk reduction. Firms aim to maximize value by minimizing the cost of risk.
An introduction to risk management concepts for future outdoor leaders. It serves up metaphors and poses suitable questions for other forms of risk management.
This document discusses risk and risk management. It defines risk as uncertainty about potential losses and categorizes risks as objective or subjective. It also discusses concepts like chance of loss, perils, hazards, and different types of risks like fundamental risk, particular risk, and enterprise risk. The objectives and steps of the risk management process are also outlined, including identifying exposures, analyzing frequency and severity of losses, selecting risk control or financing techniques, and implementing and monitoring the risk management program.
Enterprise risk management involves identifying risks, evaluating their significance, developing risk management policies, and using techniques to mitigate risks. It is a key part of business management processes and helps organizations anticipate, prevent, monitor, and mitigate risks from sources like the financial markets, business operations, and the external environment. The goal is to optimize risk control, prevention, and retention to create shareholder wealth and manage risks proactively as uncertainties in the business environment continuously change.
Risk managment and Insurance chap1-3 Addis Ababa University School of CommerceAshenafi Abera Wolde
Risk affects every aspect of an organization. The effects of risk are not
confined within any predictable boundaries; a single event can easily
influence several areas of an organization at once, producing consequences
far beyond the immediate impact. The pervasiveness and complexity of risk
presents strong challenges to managers, one of the most important being
the coordination of risk management across areas within the organization.
It deals with: the nature and management of pure risks, insurance and
reinsurance; risk concepts, classification of risks, management of pure risks
through various risk handling tools, industrial safety, general principles of
insurance and major classes of insurance, reinsurance and development &
regulation of the insurance Ethiopia
The document discusses the risk management process, which consists of 5 steps: 1) identifying risks, 2) analyzing risks, 3) prioritizing risks, 4) treating risks, and 5) monitoring risks. It provides details on each step, such as how to identify potential risks, analyze their scope and severity, rank their priority, implement solutions to address risks, and continuously monitor risks. The goal of the risk management process is to reduce threats to an organization's capital and earnings through a systematic, scientific approach.
FCF June 2014 - 02 fraud facts 2 p securing board level support for anti fra...#TheFraudTube
Securing board-level support is critical to establishing effective fraud defenses. The factsheet offers tips for approaching the board, including emphasizing the benefits of investment in anti-fraud measures which can outweigh costs, quantifying the true costs of fraud, and demonstrating returns on investment from prevention. Case studies on a city council and SME show significant returns, with the campaign in Stoke-on-Trent identifying more fraud and recovering more properties than estimated.
The document discusses the total cost of risk (TCOR) and how captives are involved in calculating TCOR. It summarizes a panel discussion on TCOR that explored whether captives properly account for premiums and losses in their TCOR calculations. The panel included a risk manager, actuary, and survey representative who discussed different approaches to calculating TCOR and whether respondents track it. Most audience members did not track TCOR. The document then provides background on TCOR components and discusses three methods for calculating the loss component of TCOR. It also gives an example of how one company calculates and reports TCOR to management, showing captives can significantly impact TCOR calculations.
PECB Webinar: Aligning ISO 31000 and Management of Risk MethodologyPECB
The webinar covers:
• ISO 31000 as the adopted standard, for ISO standards that have risk components, such as ISO 27005 and OHSAS 18001
• Description of Management of Risk (MoR) – how organizations can benefit
• Complementary values that ISO 31000 and MoR bring to each other
• How Risk Managers can evolve a practical approach to carrying out Risk Processes
Presenter:
This webinar was presented by PECB Trainer Orlando Olumide Odejide, an experienced Enterprise Architect and Chief Trainer for Training Heights Limited.
The article focuses on the Return on Equity (ROE)as the benchmark .docxmattinsonjanel
The article focuses on the Return on Equity (ROE)as the benchmark for assessing a business’s financial health.
Do you agree with this approach? (Support your response with 2 - 4 examples of financially healthy companies.).
Additionally, this article presents a spreadsheet analysis for commission-based businesses. What approach would you implement for a manufacturer?
How would it differ for a service organization, such as a CPA firm, staffing firm, or consulting firm?
ommission-based organizations’
values are affected by factors that
are not typical of manufacturing or
other retail business entities. One such
example is an insurance agency, which
exemplifies three factors germane to a
commission-based business. First, an
agency acts as an intermediary by pro-
viding the service of arranging insur-
ance coverage between an insurer and
an insured party. Thus, one of the
agency’s most valuable assets is its
client list. Second, the agency has the
fiduciary responsibility of either collect-
ing or arranging for the payment of pre-
miums by the insured to the insurer.
Third, an agency business typically is
not capital intensive, and owners gener-
ally take most of the profits of the
agency as bonuses or salary.
Our purpose in this article is to show
how a simple spreadsheet model can be
used to demonstrate the impact of dif-
ferent operating and capital manage-
ment strategies on the financial perfor-
mance of a commission-based business
such as an insurance agency. The model
is easy to develop and understand and is
flexible enough to allow for numerous
strategies. Instructors can use the model
to isolate the impact of a single strategy
or measure the impact of a combination
of strategies on performance.
The objective of the manager of a fee-
based business is to coordinate the
resources available in such a way as to
maximize financial performance. Man-
agement must determine growth, operat-
ing expenses, investment opportunities,
cash management opportunities, and the
level of profit retention. All of these fac-
tors affect financial performance and will
be considered in the model.
A typical business has various mea-
sures of financial performance that are
used in evaluating its health. Although
various measures have been developed
for evaluation of the productivity and
profitability of a commission-based
business, in this article we focus on the
rate of return on equity (ROE). Owners
and managers affect the numerator of
ROE by controlling growth, operating
expenses, investment opportunities, and
cash management opportunities. Own-
ers and managers affect the denomina-
tor of ROE by determining the profit
retention rate and, thus, the equity posi-
tion of the business. Successful business
owners should strive to maximize ROE,
which serves as a proxy for maximizing
the value of a business.
The Model
The model is a spreadsheet model that
can be used for any commission-based
business, such as an insurance agency,
travel agency, fo ...
Operational risk management is becoming an important part of corporate governance frameworks. It aims to proactively identify, assess, and manage risks to improve transparency, efficiency, and shareholder value while protecting reputation. Recent regulatory scrutiny and fines show the importance of properly managing operational risks. Actuaries are well-suited to lead operational risk management due to their understanding of risk assessment and financial impacts.
Financial risk management ppt @ mba financeBabasab Patil
This document provides an overview of financial risk management. It discusses key concepts such as risk, risk stratification, risk management approaches, interest rate risk, and term structure theories. The key points are:
1. Financial risk management involves monitoring risks and managing their impact on a firm. It uses modern finance theories to balance risk taken with expected reward.
2. Risk can be stratified into known probabilities, known parameters but uncertain quantification, unknown causation/interactions, and undiscovered or unmanifested risks.
3. A risk management approach involves identifying, measuring, and adjusting risks through behavior changes, insurance, hedging, and other means. Managing core business risks internally and hedging economic risks
This document provides an introduction to risk management, business finance, and financial information. It discusses key topics such as:
1. The definition of risk and uncertainty, different risk attitudes, and the risk management process of identification, analysis, response, and monitoring.
2. Why business finance and financial information are important for planning, controlling, decision making, and performance measurement.
3. The sources and qualities of good financial data and information, including transaction processing systems and management information systems.
4. The users and limitations of financial information for businesses and their stakeholders.
Risk management involves identifying, assessing, and prioritizing risks, then applying resources to minimize their impact or maximize opportunities. There are typical business risks like strategic, operational, compliance and financial risks. Risk management processes include establishing the context, identifying risks, assessing them, developing risk strategies, implementing a risk management plan, reviewing and communicating. Key strategies for addressing risks include transferring risks, avoiding risks, reducing risks, and accepting risks.
1) Risk management involves identifying, assessing, and prioritizing risks in order to minimize negative impacts and maximize opportunities. It also includes transferring, avoiding, reducing, or accepting risks.
2) While risk management standards aim to increase confidence, they are sometimes criticized for not measurably improving risk. Risk management must balance high-probability/low-impact risks with low-probability/high-impact risks.
3) Intangible risks like those from deficient knowledge, relationships, or processes directly reduce productivity and must be identified and reduced.
The document discusses using analytics to help companies determine appropriate insurance coverage levels when they have little loss history to rely on. It describes quantifying a company's exposure by estimating the likelihood and potential costs of large losses based on industry data. The document provides an example of how a company could use industry loss data and distributions to analyze whether $75 million in coverage would adequately cover its risks 80-90-99% of the time. It emphasizes that analytics can provide credible support for insurance and risk transfer discussions.
The more I understand IFRS17, the more I realize how vital it is to have a comprehensive Enterprise Risk (ERM) Regime in place as half of IFRS17 Compliance is already met by insurers with robust ERM Regimes in place that already tackles the key quantitative and qualitative risks facing the insurer. I've been working intensively on ERM since 2013 and while ERM was adopted due to pressure from regional regulators and best practices, still I feel that risk regime in many insurers is just kept to fill the stomach of the file cabinets and not taken as an active part of management decision making. Hence, it is good to see ERM gain in importance due to IFRS17 compliance with a deadline arriving soon in 1.25 years as at 1st Jan 2023.
In this 73 slides presentation we briefly describe 1) pricing how it is done in an insurance company and its various risks 2) ERM 3) Risk Registers 4) capital modeling 5) stress testing 6) reverse stress testing 7) cat and pandemic modeling 9) tangential reference to health insurance given as application 10) structural understanding of market cycles and so on.
An approach to erm in the insurance industry apria 2002 rama warrier&preetiRama Warrier
This document discusses implementing an Enterprise Risk Management (ERM) approach for an insurance company. It begins by defining ERM as a holistic approach to managing all risks across an organization, rather than managing risks individually. The document then outlines key risks for an insurance company, including marketplace risks, operational risks, international risks, mergers and acquisitions risks, and others. It proposes a four-phase ERM strategy for insurance companies: 1) Identifying risks, 2) Quantifying risks through modeling and analysis, 3) Measuring and evaluating risks, and 4) Managing and monitoring risks on an ongoing basis. The goal is to develop an integrated risk management process to help insurance companies optimize decision-making and meet business objectives
This document discusses managing the total cost of risk and controlling price through effective risk management. It outlines identifying exposures through qualitative and quantitative analysis. Control measures are then implemented to mitigate exposures, such as loss control programs and fraud prevention. Risk is transferred through insurance or retained using self-insurance. Ongoing monitoring is needed as exposures change over time. The goal is to structure a risk management program that protects the organization, personnel, property, and net income by addressing all aspects of risk.
The document discusses why a safety manager is needed in any organization or business. It notes that thousands of workers are injured or killed each year due to unsafe work conditions. While owners may not see these incidents directly, they result in billions of dollars in costs to businesses each year. Having a safety manager can help identify risks, develop safety plans and training, conduct inspections, and ensure OSHA compliance to reduce accidents, injuries and their associated costs. This protects both workers and the financial health of the business. The document provides examples of potential safety issues and costs associated with various minor injuries or threats in order to demonstrate the importance of proactive safety management.
Reprint of Healthcare Financial Management Association article discussing the importance of implementing enterprise risk management in a healthcare setting. 14 years later ERM in healthcare may now be critical to organizational survival.
ComplianceOnline PPT Format 2015 Developing an Effective Fraud Risk Managemen...Craig Taggart MBA
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Financial risk management involves identifying risks, measuring them, and developing plans to address risks, particularly credit risk and market risk. It focuses on when and how to hedge risks using financial instruments. Common risk management techniques across financial firms include independent risk assessments, controls on risk taking, and hedging risks with derivatives or reinsurance. While techniques are similar, firms focus more on risks dominant in their primary business lines, with commercial banks most concerned with credit and funding risks, securities firms with market risk, and insurers with ensuring adequate technical provisions.
This document provides an introduction to risk management. It defines risk and discusses the objectives and benefits of risk management. It outlines the key steps in the risk management process, including identifying exposures, selecting treatment techniques, and implementing a risk management program. Treatment techniques include risk control strategies like loss prevention and risk financing options like retention, non-insurance transfers, and commercial insurance. An effective risk management program can help organizations achieve objectives and reduce costs.
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Business analysis - Prescriptive analytics Introduction to Prescriptive analytics
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2. Understanding Total Cost of Risk (TCOR)
Risk exists everywhere in business. If your business is only focusing on insurance premiums as your way of
quantifying risk, you may be missing costs that you have more control over.
For example, premiums may be the least controllable costs, as insurance rates are determined by outside
forces such as weather related events, the stock market, interest rates and the insurance marketplace.
Furthermore, the benefit of decreasing premiums is negated if an organization sees an increase in indirect
costs of claims and administrative costs. True cost reduction is most impacted by lowering indirect costs,
which can cost more than the actual claim itself. TCOR helps identify those costs.
3. Components of TCOR
+ + =
Insurance Premiums Loss Costs Risk Management Costs Total Costs of Risk
The Total Cost of Risk approach encompasses an enterprise holistic view. Seeing all the components
relating to risk and how they have a direct impact to a business’s financial statements. Total Cost of Risk
or TCOR, is made up of the following components:
4. Components of TCOR
• Insurance Premiums - A traditional method of accounting for the total amount of premiums paid to
insurers.
• Risk Management Costs - Risk management cost are the amount of time and resources that a
business inputs to manage their exposures to loss. These costs can be broken down into four
categories.
Internal
Costs
Safety
Training
External
Costs
Capital
Investments
5. Components of TCOR
• Loss Costs - Loss costs are define by two categories, Direct & Indirect Loss Costs.
o Direct Loss Costs are easily quantified, these are monetary amounts corresponding to an
incident.
o Indirect Loss Costs are much more difficult to quantify. Due to the nature of these costs being
hidden and often tied to business opportunity loss, they frequently go unaccounted for and
considered to be financial leakage.
6. Financial Leakage
In-Direct Loss Costs are the #1 driver for financial leakage.
Take the example of an average incident and comparing the potential Direct and In-Direct Costs associated.
Meetings Missed
Damage to Reputation
OHS Fines or Penalties
Lost Productivity
Administrative Claim Costs
Loss of Business Opportunity
Loss of Employee Moral
Recruiting, Hiring, Training New/Current
Employees
Accelerated Depreciation
Increased wages (Overtime)
Damaged Asset
Injury Costs
Direct
In-Direct
7. Financial Leakage
“If you can measure it – you can managed it”
The Total Cost of Risk strategy will uncover those keys areas that are impacting the bottom line and
provide actionable steps towards greater profits.
8. Total Cost of Risk
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2017 2018 2019
TCOR Rate
When corporations accurately measure TCOR, they tend to possess
the motivation to invest into a more effective risk management
effort, which can provide a significant rate of return.
Many business owners use TCOR to realize the following benefits:
• Increased productivity, profitability and efficiency
• Reduced costs across the entire business, not just reduced
insurance premiums
• A better idea of any inconsistencies in the organization’s risk
management strategy
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
2017 2018 2019
Insurance Spend Loss Costs Risk Management Costs
9. For more information on how to utilize TCOR to maximize the bottom line – Feel free to contact:
Brad Gaboury
bgaboury@mhkinsurance.com
Text/Call: 780-887-7755