Insurance and Risk Management

Risk may be at some part of life at some time or the other. Each and every organization can be exposed to risks. Some may be pure risks that include chemical release, fire, explosion etc and some may be speculative. Pure risks are generally handled as safety and operational issues by professionals. Finance personnel addresses the risks that arise out of failure of the safety and optional measures. Risk management strategies are to be opted by every organization to opt for risk transfer measures like availing insurance cover etc. In order to maintain these strategies risk management and insurance planning has to be implemented.

The uncertainty and potential for accidental or unanticipated loss is reduced by risk management. It provides the basis for maximizing opportunity. The strategic process of risk management includes protection of the assets and ensures the financial stability of an organization from the effects of competitive business decisions.

The risk management process mainly includes four steps. They are risk identification, risk analysis, risk control, and risk treatment. The identification of possible risks is covered in risk identification. Then the risk analysis is done including frequency of loss, its severity, consequences of loss, public perception and probability of occurrence. The next one is risk control. In this step, certain control measures are to be planned. They may be crisis and emergency plans, environmental standards, business recovery plans and so on. Finally risk treatment includes contractual transfer, deductibles, and alternate risk financing. This may also include providing insurance of different kinds. Risk management is most helpful in terms of public liability insurance.

Therefore in order to protect oneself from loss in business, an insurance policy is essential. Insurance protects business from loss and recommends a particular risk management program which has to be developed, implemented, and continuously monitored and improved. This may result in the reduction of costs of the insurance premiums and other costs that are associated in operation of business.

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