Risk and uncertainity Risk management

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1. Peril and hazard,types of hazard
Peril is defined as the cuse of loss, perils are theft ,burglary hailstorm
earthquake etc.
Hazard is a condition that creates the chance of loss or incease the chance of loss
Defective iring in cinema increase chance of fire or poorly maintained road
increase the road accident are e!ample of physical hazard.
Dishonesty of individual hich increases the frequency and severity of loss is
called moral hazard.
"orale hazard refers to carelessness and or indifference to loss because
of the presence of insurance #$%"P&#leaving car key in an unlocked
car. 'uch careless act increase chance of loss.
(lassification of risks

)most cases, our concern about risks relates ultimately and e!clusively to
individuals, hether
ras members of family, as oners, employees, or customers of business or as
citizens *
Pure and speculative risk

Pure risk is said to e!ist hen a situation is chracterzed by uncertainity

as to hether or not loss ill occur.
'peculative risk is present hen an event can result in either loss or gain
or status quo.
'tatic and dynamic risks
Dynamic risk arise from changes that takes place in every society,that
is ,economic,social technological, environmental, and political changes .
Dynamic risk are closely related to spcculative risk.
'tatic risk are those that ould e!ist in the absence of such changes
Pure risk e!ample of static risks.
'ub+ective and ,b+ective risks
,b+ective risks are more precisely observable and therefore measurable.
-n this type of risk,actul e!perience may differ from one e!pected.
'ub+ective risks are those basiclly emanating from a persons state of
mind or mental attitude.
.undamental and Particular risks
Particular risk affect mainly the individual or firm and arise from
factors over hich he may e!ert some control,e!ample car theft bank
robberies.
.undamental risks are those hich affect the hole of society or ama+or
part therof, such as earthquake and floods.they are impersonal in cause
and effect.
(lassfication of source of risks
,P#R%/-,0%&1-0/#R0%& R-'2'
/his risks are those that arise from the operations of an orga ni

1.
,perational1internal risks
.inancial risks
3 'trategic risks
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5 Historical development of risks, chronological
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7 R-'2 "%0%8#"#0/ PR,(#''
Risk -detification of losses

#valuate potential losses,

"easure e!posure of risk, .requecy and 'everity

/reating loss e!posure /echnique

-mplement and Decision making

.eedback
%voidance

Risk financing

Risk retention

-nsurance

0on insurance transfer

(omination

Hedging

Research

Risk matri!,.requency and severity diagram using R" technique