Method of handling and managing risk

The existence of risks has generally brought a lot of problems and challenges to man and his environment.  Either as an individual or in and organized business or becomes a must for us to find the different method in handling and managing the problems of risk. There are in fact, plenty methods in which we can singly apply or in some instance the combination of carouse method can be used. Some of the method are presented below 

1. Risk avoidance

In this method, the person can totally the property the individual or the activity or the activities that is associated with the risk, this simply means that the individual has avoids the risk.  Doe example some one can avoid a risk that is associated with an estate or building by simply not buying the house or a business person can avoid product liability risk by not producing or distributing a particular product.

Avoidance is the most effective an inexpensive way but it is not always practicable in the real sense when it comes to risk such as the ones that directly associated with illness or death which cannot be avoided. At times avoiding something simply means forgoing a lot of benefit that should have come your way. 

2. Risk prevention

Prevention as they is better than cure . Hence where it is economically wise to do.  The insurance of such unwanted suitaution can be prevented from happening.  For example, the auto mobile accident can be practically avoided through the provision of good and better road network, hood traffic system and operation and hood maintenance culture. Secondly installation of sprinklers system and bringing security can prevent any fire outbreak, thief,and burglars.prevention is sometimes not very possible or effective.  because despite all the measure that are pit in place incidents or theft is still being recorded.  Also were prevention prove certainly less ineffective, the application of other methods can be use or employed. 

3. Risk reduction 

This takes place by reducing the number of loss by applying physical device gadget ot safety guarrds,warni g light or through enlithenment and safety measures in the use of products. 

4.Risk tranasfer

This has to do with an individual that is facing the risk  induce another individual Yi assume the risk after receiving some consideration or share for his willingness to take over the particular risk. 

Classes of risk 

It is a fact that risks are too many to put in a specified writing because some one can see that very facet ,if our lives. Peeaent different situation.  Experts in insurance have however list risk into 

1. Speculative and pure risk

2.fundamental and particular risk 

A. Speculative risk

This arise when the result can be either good or bad to the individual that is facing the risk. 

Doe example a business man involve in import of goods may loose due to much unforeseen circumstances such as government policies that can change at any time and also new taxes can change and he can make much profit..  Another thing about the speculative rusk is that it affect only some people and not necessarily the whole community. Hence when one business reduce and the person in business loose could be due to the required establishment and development of other enterprise when some other individuals are in the same business gain as him. 

Secondly a major characteristics of the speculative risk is that,it so mostly immeasurable, that is we cannot reliably know their number and severity due to low information about their occurance.

B. Pure risk 

This is that risk which present unfavourably disadvantage when it happens. For instance destruction of houses and property by fire or job loss,  all of which entail unwanted result.  In pure risk the unfortunately result affects not only the individual but the entire community. Once it occur There is probality of gain,but loss.  Pure risk can be classified into the following; 

a. Personal risks

Tesw refer to the possibility of loss of money or property due to loss of capability to earn money due to mainly period such as deaths that are premature ,sickness, old age, unemployment and disability.

b. property risk

possession that are personal are exposed to destruction or stealing and hence the individual owner faces property risk, property risk involve two categories if loss they are direct and indirect or also known as conseqeuncial loss.  Direct loss where the person suffers directly due to loss of the valuables while indirect loss is when for example companies facilities and equipment are destroyed, the owner losses not only the facilities but also the earnings that would have come through their usage. 

C. Liabilities risk

These known as unintenssional injury to the other person or damage to their property because of carelessness or negligence.  Liability risk has to do with possibility of loss to present assets or future money as a result of damages or legal liabilities coming from unintentional and intentional Torts Fri example the invasion of once right live. 

d. Risk arising from failures of others 

This comes when one is contracted to execute a job or service result Yi your loss. Hence the risk is faced by you alone. For instance a contractors failure to complete his work of a construction project at the specific period of time.

3.fundamental risks

All loose that are imperative and impersonal in the beginning involve fundamental risks.  These are risks which are normally caused by social ,political and economical issues . These are often affected in the society in general and not nessesery an individual.  For instance fundamental risk include war, probation and drought etc. 

4.Particular risks

These has to do with losses that happen from and individual event and for which the impact affect just the person and not the entire society.  Unlike the fundamental risk. It so the person in the act the is responsible rather than the community. Therefore particular risks are solved by the person in the situation of instance and loss prevention ideas. 

Risks management 

Risk management is the systematic and scientific method or approach devised to minimize the adverse effects possible finance loss by identifying potential sources loss, measuring the financial disadvantages of loss and decides in how each of the risk can be solved. 

Many organisations of business and enterprices now take into consideration risk management as part their  seriose component of running the establishment. Such units are supervise by experienced experts ,known as risks mangers.

The objective of risk management 

Risk management have been identified to be a very important part for a business to succeed in its operations. It is employed to meet up and achieve These particular objectives which are as follows; 

a.  The preservation of effective operation of the firm.

b. The protection of employees against small and major injuries that arise from accidents.

c. Efficiency in the use of organization resource and capital.

 methodology of risk management 

Below are the basic six fundamental steps in good risk management ;

Determine the objective 

Every successful organisations operations start with a good objectiv. Which simply means deciding on what the firm intends to accomplish from it risk management program.  And for the program to succeed and become of benefit a deliberate plan has Yi be obtain to serve as a guide that will provide consistency . It so therefore important to start a risk management operation which will clearly states it objective which will them serve as a guide and consistent mechanism.

Identifying the risk exposures

Having establish the objectives for this programs it is important then to research and know the various risk that are attach to which the business is exposes to thou it is mostly difficult to generalize the risks that a particular organization faces due to the variance in their operations and the difference in the condition of the company however every expert in risk management is expected to In a way or other be aware and know of the risk involve. In order to avoid events in which important risks are left, the risk manager expert can use the following mechanism in other to have a systematic approach in handling and managing risk. 

a.  Flow process charts

b.  Insurance check list 

c.  Inspections of operation 

d.  Financial statements analysis

e. Risk analysis and questionnaires

In addition to the singular use or combination of this mechanism the risk manager expert must also have a vast reaching accurate information system that will provide a continuous flow of accurate information about both the acquisition if new assets or new construction and operational changes. 

Evaluation of risks

This is known as measuring of the potential size of the loss and the probability of it likely occurance. in ranking, evaluation priority becomes more important and neccesary 

. Some risk will be of priority because of the severity of loss in them. How ever the evaluation, "it is always significant to consider any any exposure with the potentials of loss that would represent financial (meltdown) ". There fore exposure are ranked into critical unimportant and important. What is considered in such rankings is the financial impact that the loss would have on the organisation.  For example critical risk can result into bankruptcy, important risk that result would from the origin have to borrow to stay relevant and unimportant risk outcome can be handled and manage by the company's existing asset or property. 

Consideration of alternatives and selection of risk treatment device

After having a proper evaluation of the risk, should now consider the risk manger ideas that will be use to tackle with each of the risks.  The option that are available here include avoidance retension,prevention or transfer.  The decision to choose the ideas and techniques depend on the risk policy management available to meet the loss if it happens, the advantages and cost in each of the presented methods and the available information.

Implementing the decision 

what ever choice or decision is reach, due process administrative procedure is neccesary to implement the decision. For example where the decision, for instance when loss prevention is applied, proper and effective loss prevention program must be put in place and implementation is Carried out and also if on the other hand transferring the risk to insurance company is selected, this must be followed by choosing the negotiation and other insured.

Evaluation and review

The two issues that made this part of risk management very important are; the fact that risk management does not take into consideration vacuum.  Changes are always neccesary and newer risk may come up or old risk discarding and therefore the techniques and ideas that were initially use may become absolute today and the previous mistakes may be known and discovered.  Therefore evaluation and review of risk management research and programs allows for a new ideas in respect of the above example. Some times independent consultants are employed to evaluate and review in respect of the above instance.

Also read:

Business management

Business Insurance processes