Risk Handling Methods

Presented ByMohankrishna BPranavkumar Jain

Introduction

• Vital phase of risk management process• Based on the loss exposure analysis, decision is made

about the way to handle the risk• Trade off between cost of risk handling and cost of risk is

done

Let’s see the ways in which risk can be handled…..

Risk Management MethodsLoss

Control

Reduced Level of Risky

Activity

Increased Precaution

Loss Financing

Retention and Self-

Insurance

Insurance

Hedging

Other Contractual

Risk Transfers

Internal Risk Reduction

Diversification

Investment in information

Loss Control• Actions that reduce the expected cost of losses by

reducing the frequency of losses and / or the severity of losses that occur

• Sometimes known as risk control• Frequency of losses- loss prevention • Severity of losses- loss reduction

Loss Financing• Methods used to obtain funds to pay for or offset losses

that occur• Retention: A business or individual retains the obligations

to pay for part or all of the losses• Self- Insurance: When coupled with a formal plan to fund

losses for medium to large businesses

Loss Financing

• Insurance: a contract facilitating transfer of part/full risk to another party capable of bearing the risk

• Hedging: used to offset losses that can occur• Other contractual risk transfers: allow businesses to

transfer risk to another party

Internal Risk Reduction

• Businesses can reduce risk internally• Diversification: reduce risk by diversifying their activities• Investment in information: to obtain superior forecasts of

expected losses

Thank You For

Patience Hearing