Risk Management: What is it?

by | Oct 5, 2016 | Career and Education

Risk management is the continuous process of identifying, analyzing, evaluating, and treating loss exposures and observe risk control and financial resources in order to mitigate adverse effects of loss. Compliance Education Institute offers a Third Party Risk Management Course.

Loss might result from these:

* financial risks like cost of liability and claims judgments
* operational risks like labor strikes
* perimeter risks which include political or weather change
* strategic risks which include loss of reputation or management changes

Enterprise Risk Third Part Management, will expand the province of risk management in order to define risk as anything which may prevent the organization from accomplishing its goals.

Even though accidental losses are unplanned and unforeseen, there are techniques which may make circumstances more predictable. The more predictable the circumstances, the less risk will be involved since the occurrence may be mitigated or prevented; or, at least, expenses may be budgeted and estimated. It’s this process that makes loss more predictable that’s at the core of insurance plans.

The key to an efficient and economical risk plan is control over the risk management functions with an assurance that actions done are necessary, desirable, as well as effective to decrease the overall price of operational risk.

Risk management programs are formulated and assessed around the price of risk.

Cost of risk comprises of:

* Retained Losses – Exclusions, Retention, or Deductibles
* Cost for Loss Control Activities
* Net Insurance Proceeds
* Administrative Cost to Manage the Program
* Claim Management Expense

The advantages of a risk program ought to result in savings to the company when assessing those elements in the aggregate. Any one category might show a decrease or increase in cost while considered by division or individually in a given time frame.

Kinds of Loss Exposures inside the province of risk management involve:

* Property – Personnel & Real, Intangible and Tangible
* Net Income – Increase in Expense or Decrease in Revenue;  may be due to Property loss (suppliers or yours, or customers) or loss because of Statutory or Civil judgments and fines, or loss of Key Personnel
* Liability – Civil as well as Statutory (EPA, Statutory Workers Compensation, Torts, and additional Administrative regulations)
* Personnel – Through Disability, Death or Retirement Key Personnel or a catastrophic loss to multiple employees

Get your Third Party Risk Management Certification at Compliance Education Institute today!

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