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Risk factors

Situations that influence an individual’s health and may cause illness including heredity, sex, race, age, biological factors, environmental factors, and behavioral factors (smoking, inactivity, response to stress).

Risk financing

Risk management techniques to provide funding for losses after they have occurred. Some risks are retained and paid out of normal cash flow, reserves or a formal self-insurance scheme, the ultimate of which is a captive insurer. Insu ance is a common external source of finance while non-insurance risk transfer through hold harmless agreements and financial instruments such as weather derivatives also entails external financing. There are numerous alternative risk transfer products that offer a range of solutions, particularly for firms active in the financial and capital markets.

Risk Identification

The process of identifying the exposures to potential property, liability or personal losses.
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UK: The initial risk management step to identify the firm’s exposure to risk. It entails: reviewing all relevant data on business assets, activities and personnel; and checking financial statements, including the balance sheet and the loss of profit and loss accounts, to identify potential sources of loss. Other techniques include interviewing, in-house workshops, observation and preparing flow charts to show all operations of the organisation and all loss-possibility situations in the purchase-process-distribution sequence. Risk identification makes it possible to prepare a risk inventory.

Risk identification Checklist

A listing of all the loss exposures that might possible exist.Financial Statement Method : The use of financial statements, together with a checklist, to identify the exposures of a particular business.Flow Chart Method : The use of flow charts, together with a checklist, to identify the exposures of a particular business.Probability Distributions : Theoretical probability distributions for which a formula has been developed based on some assumptions about the behavior of the variable. Useful distribution in risk management are the position distribution, the normal distributions, the log-normal distribution, and others.Probability Distribution of Total Rupee Losses Per Year : A listing of all the total rupee losses that might occur in a year and the probabilities of each possible total rupee amount. The two component probability distributions that determine this probability distribution are the probability distribution of (i) the number of occurrence, and (ii) the rupee loss per occurrences.Probability Moderate : The likelihood of a loss has happened once in a while in the past and can be expected to occur sometime in the future. ‘Loss Maximum Probable : The worst loss that is likely to occur because of a single event. Synonym to loss maximum estimated, loss estimated probable or possible maximum, loss probable maximum etc.Loss, Maximum Probable Yearly Aggregate : The largest aggregate rupee loss that is likely to occur during the year. This aggregate loss depends upon the number of occurrences per year as well as their severity.Probability of Loss, Spatial : The proportion of similar units exposed to loss over a given time period that experience a loss, given a very large number of units exposed.Probability of Loss, Temporal : The proportion of similar times during which a unit is exposed to a loss that the loss will occur, given a very large number of times exposed.Variation, Coefficient of : The standard deviation divvied by the mean or the expected value. A measure of the dispersion, scattering or variation of the outcomes in a probability distribution. The larger the coefficient of variation, the less predictable is the future outcome.Risk, Interest Rate : Unpredictability of future interest rates. Whether a rise or fall of interest rates has favorable or unfavorable effects on an organization depends upon whether it is a debtor or creditor and the extent to which its resources are committed to borrowing or lending.

Risk inventory/register

A record of all risks identified during the risk management process. Each risk is described, classified by type and assessed in terms of its potential in terms of severity and probability. The proposed control or responses measures are noted together with details of the ‘risk owner’, i.e. the manager or employee responsible for implementing the control measures and monitoring the risk. The ‘owner’ is given a target date for implementation or other designated action.