Business Risk Management Organization参考.ppt

Business Risk Management Organization Where does the risk management function fit within the overall structure of business ? In general, Senior management Most Large companies have a specific department Risk management function is subordinate and thus reports to ---mostly finance dept. ----some cases legal dept. --- a smaller proportion human resource dept. Business Risk Management Organization Centralized vs. decentralized risk management OBJECTIVES OF RISK MANAGEMENT(TOPIC 03) Main ReferenceHarrington, S.E., Niehaus, G.R. (1999). Risk Management and Insurance. USA: Irwin/McGraw-Hill SYNOPSIS Define and Explain the overall objective of risk management. Explain the risk of cost concept. THE NEED FOR A RISK MANAGEMENT OBJECTIVE Risk refers to either variability around the expected value or the expected value of losses Risk is costly , both in directly and indirectly So. Risk management seeks to mitigated this risk and increase social welfare But risk management is also costly So, it requires objectives. UNDERSTANDING THE COST OF RISK Cost of losses can be determined ex post(after the fact) And estimated ex ante (before the fact) Risk Management decision must be based on ex ante COMPONENTS OF THE COST OF RISK……………. 1. Expected cost of losses Direct Losses Indirect Losses 2. Cost of loss control Increased precautions Reduces activity COMPONENTS OF THE COST OF RISK…………. 3. Cost of Loss financing Retention and self-insurance Insurance Hedging Other risk transfers Cost of Internal Risk Reduction Methods Diversification Investments in information COMPONENTS OF THE COST OF RISK 5. Cost of Residual Uncertainty Effects on shareholders Effects on others stakeholders COST TRADEOFFS The expected cost of direct/indirect losses and loss control cost The cost of loss financing/internal risk reduction and the expected cost of indirect losses, and The cost of loss financing/internal risk reduction and the cost of residual uncertainty COST OF OTHER TYPES OF RISK Risk is