Professional Documents
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IDENTIFICATION AND
MEASUREMENT
Risk Management and Insurance
By Harrington & Niehaus
(Class 4)
AGENDA
Risk Identification
Identifying Business Risk Exposures
Identifying Individual Exposures
RISK IDENTIFICATION
The first step in the risk management process is
risk identification; the identification of loss
exposures.
There are various methods of identifying
business risk exposures, such as:
RISK IDENTIFICATION
Liability losses
Potential legal liability losses as a result of relationships with
many parties, such as suppliers, customers and members of the
public.
RISK IDENTIFICATION
One method of identifying individual / family
exposures is to analyze the sources and uses of
funds in the present and planned for the future.
Potential events that cause decreases in the
availability of funds or increases in uses of funds
represent risk exposures.
Important risks for most families are drop in
earnings prior to retirement due to death /
disability of breadwinner, physical and financial
assets, medical expenses, personal liability etc.
Discrete;
Continuous.
Distribution 2
Outcome Prob.
$0
0.33
$500
0.34
$1000 0.33
Distribution 3
Outcome Prob.
$0
0.4
$500
0.2
$1000 0.4