Risk terminologies
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The document discusses risk management terminology and concepts, emphasizing uncertainty related to loss occurrence and various types of perils, including natural, human, economic, and legal hazards. It outlines key aspects of enterprise risk management, including identifying, assessing, and mitigating risks, and lists essential terms and implementation requirements for effective risk management. The document also provides examples from the energy industry, highlighting the evolution of risk management practices from the 1970s to the 1990s.
Risk terminologies
- 1. 1. Risk-Terminology, RM By-Chetan sharma(2012-22) And Harpreet singh(2012-20)
- 2. Based on “Uncertainty” Uncertainty concerning the occurrence of a loss Based on “Expected Value” Deviation from expectation
- 3. Perils (Immediate) Causes of loss Natural perils Acts of God Human perils Human acts, errors, and omissions, whether intentional or unintentional, causing a loss Economic perils Economic events or phenomenon causing a loss Insurable and Uninsurable perils
- 4. Hazard A condition that creates or increases the chance of losses, their severity, or both. Physical hazard Moral hazard Morale hazard Legal hazard
- 5. Types of Pure Risk Personal Risk Property Risk Direct Loss Indirect Loss Liability Risk
- 6. Risk Management Traditional risk management? Enterprise risk (Major) risks faced by an organization (or firm) Enterprise risk management The process (or discipline) by which an organization assess, controls, exploits, finances, and monitors risks from all sources for the purpose of minimizing the effects of risks on organization’s value.
- 7. 7 Key ERM Risk Terms Strategic/Franchise Risk Legal/Compliance Risk Staffing/Organization Risk Credit Risk Market Risk Operational/Systems/Technology Risk Environmental Risk Sovereign Risk Financial/Documentation Reporting Risk Liquidity Risk
- 8. 8 Key Implementation Requirements 1. Provide leadership and “set the tone from the top” 2. Allocate resources for enterprise risk management 3. Establish vision and overall plan 4. Set milestones and individual accountabilities 5. Establish risk measures and early warning indicators 6. Integrate ERM into business planning and operations
- 9. 9 Example: Energy Industry Insurance Credit Market Insurance Credit Operations Insurance Business Organizational Insurance Financial Risk Management Enterprise Risk Management 1970s 1980s 1990s (Deregulation)