Once an organization’s Sr. management has declared minimizing the adverse effect of accidental losses to be a goal, one logical procedure for achieving this goal is to (i) identify and analyze exposures which may lead to accidental losses; (ii) formulate feasible risk management alternatives for dealing with these exposures; (iii) select the apparently best alternative technique or combination of techniques; (iv) implement the chosen techniques; (v) monitor the results; and if necessary (vi) modify the chosen techniques to adapt to change in loss exposures or to tolerable changes in the level of losses.

A Risk Management Consultant is an expert who can be hired on a project or retainer basis to help solve specific problems. They provide advisory on not only conventional insurance, but also on topics like self-insurance, claims management, loss prevention and project advisory.

According to Fayol: “The object of this (security activity) is to safeguard property and persons against theft, Fire and flood, to ward of strikes and felonies and broadly all social disturbances or natural disturbances likely to endanger the progress and even the life of the business. It is the master’s eye, the watch dog of the one man business, the police or the army in the case of the state. It is, generally speaking, all measures conferring security upon the undertaking and requisite peace of mind upon the personnel”.

The post-loss and pre-loss objectives that a business or family wishes to achieve through risk management.

Economists have conceived of subjective risk in terms of utility functions, liquidity preference, and capitalization of income streams. The risk averter, for example, can be described in terms of a utility curve that is convex from above when measuring his attitudes toward wealth or income. He may be described in terms of his penchant for cash and in terms of the interest return he requires for not holding cash. Finally, his risk may be described in terms of the rate at which he capitalizes a given income stream expected from an investment. Risk takers will end to exhibit opposite characteristics from risk averters. Some success has been achieved in identifying risk preference in economic terms; however., economists generally have not considered types of risk other than financial risk in their analysis.

Enterprise Risk Management (ERM) in business includes the methods and processes used by organizations to manage risks and seize opportunities’ related to the achievement of their objectives. ERM can also be described as a risk-based approach to managing an enterprise, integrating concepts of strategic planning, operations management, and internal control.In its “Overview” of Enterprise Risk Management,” the Casualty Actuarial Society describes ERM as “… the discipline by which an organization in any industry assesses, controls, exploits, finances and monitors risk from all sources for the purposes of increasing the organization’s short and long term value to its stakeholders.
Similarly, COSO (Committee of Sponsoring Organizations) defined ERM as: “… a process, affected by an entity’s board of directors, management and other personnel, applied in a strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity goals.”

There are eight components viz.,

Internal EnvironmentObjective settingEvent IdentificationRisk AssessmentRisk ResponseControl ActivitiesInformation and communication, andMonitoring.These eights components are used for achieving the four categories of objectives of the framework of ERM viz., (i) Strategic High level goals: designed to support the entity’s mission or vision (ii) Operations: efficiency of operations including achievement of performance, goals and safeguarding against loss (iii) Reporting: reliable financial and operational data and reports and (iv) Compliance: with laws and regulations.

Risk Management Versus Management : Management Defined : Management may be defined as the process of planning, organizing, Directing and controlling the resources and activities of an organization in order to fulfill the objectives of that organization at the least possible cost.

Risk Management Defined : Risk management may be defined as the process of planning, organizing, Directing and controlling the resources and activities of an organization in order to minimize the adverse effects of accidental losses on that organization at the least possible cost.

Management and Risk Management, Common Characteristics : Because risk management is a form of management it,, lie all management: (i) is Directed toward the goals of the organization, (ii) requires the making and implementing of decision, and (iii) is performed through the planning, organizing, directing and controlling of the efforts of others.

Risk is an important element in describing the basic development of society, which may itself be viewed as a risk-handling device. The more elaborate and structured a given society is, the more likely it is that persons within the society will exhibit risk aversion as an individual trait. However, this hypothesis can only be supported within Direct evidence.

Psychologists have Directed their efforts in identifying and measuring risk attitudes by studying personality variables. Other than financial risk, they have identified social or physiological risk. They have studied the degree of consistency of risk behavior across different variables and have analyzed and contrasted group versus individual risk attitudes. The risk averter is described in psychological terms as one who has a low need for achievement and whose life experience tends to show a lack of interest in activities commonly identified with the masculine role (through sports, dangerous or daring activities, and the like). The risk averter also exhibits a relatively high degree of ambivalence it the type of risk concerned is either physical or social. This same individual, however, may well be willing to take relatively high financial risk. This finding emphasizes the need for distinguishing different types or risk before attempting generalization. Psychologists have also shown that different measures of risk do not always agree with one another when tested on the same group of subjects. Thus, peer valuation may not agree with other measures of risk. Group discussion has been shown to have the effect of increasing the degree of individual member of the group. The popularity of the committee in business and social life may be explained by this fact, and group action may be an effective way to secure more acceptable decisions under uncertainty. This conclusion supports the position that increasing risk aversion in society has brought about increased use of committees that are able to produce decisions on risky matters with greater facility than individual managers.