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    RISK MANAGEMENT

    CONCEPT

    &PHILOSOPHY

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    In the organisation, everybody remainsconcerned about

    profit, performance and productivity.

    talks aboutvision, mission and goals.

    In the process, we forget to makeprovisions for unforeseen and

    uncertain losses.

    RISK MANAGEMENT as a concept

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    In spite of best laid plans, practice,

    protections and precautions,

    accidents/lossesdo take place.

    They are uncertain, unpredictable butinevitable.

    RISK MANAGEMENT as a concept

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    Day by day

    Things are becoming increasinglyCOMPETITIVE, DEMANDING& AGGRESSIVE

    Road ahead is uncertain and

    unpredictable

    Therefore calls forPrudent Risk management.

    RISK MANAGEMENT as a concept

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    A systematic way of protecting

    business resources and incomeagainst losses so that the aims of a

    company can be reached without

    interruption

    RISK MANAGEMENT as a concept

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    6

    What Is Risk Management ?

    The Identification , Analysis and Economic control ofthose risks which can threaten the assets, human being

    or earning capacity of an enterprise.

    The real objective of Risk Management is to reduce

    fear of the unknown and unexpected events and to

    create confidence in future.

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    7

    Why Risk Management is mportant

    Business

    Risks

    Exposures

    Risk exists whenever the future is unknown.

    fire

    floodaccident

    lightning

    Risk ManagementPlanning organizing & controlling the activities of a firm to efficiently

    minimize the adverse impact of risks on the achievement of the

    companys goals.

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    TYPE OF LOSSES

    PROPERTY

    LIABILITYPERSONNEL LOSSES

    PECUNIARY LOSSES

    It is necessary to know the Financial aspects of variouslosses that can occur inspite of the fact that

    sufficient care has been taken

    RISK MANAGEMENT as a concept

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    10

    Econom ic cost of r isk

    Property losses

    Liability losses

    Personnel losses

    Costs of Unexpected losses

    Costs of Uncertainty itself

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    RISK MANAGEMENT as a conceptTYPE OF LOSSES

    PROPERTY

    damage or loss resulting from

    fire, explosion, flood, theft or any other peril.

    LIABILITY

    for injury to third party

    damage to their property caused by negligence

    Or

    other tortuous act of the firm

    Or

    its employees .

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    PERSONNEL LOSSES

    injury or death of employee

    and may

    involve extra cost by way of compensation

    PECUNIARY LOSSES

    such as

    interruption due to damage, loss of sale, business

    misappropriation or theft of money .

    RISK MANAGEMENT as a conceptTYPE OF LOSSES

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    THE REAL OBJECTIVE OF RISK MANAGEMENT

    IS TO REDUCE FEAR OF THE UNKNOWN

    &

    UNEXPECTED EVENTS&

    TO CREATE CONFIDENCE IN FUTURE

    PROTECTION OF THE COMPANYS ASSESTS AND EARNINGS

    AGAINSTLOSSes , Including PROTECTION against LEGAL LIABILITIES,

    AT A MINIMUM COST ( Premium)

    COMMENSURATE WITH SATISFACTORY COVER .

    RISK MANAGEMENT as a conceptOBJECTIVES

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    High Capital Intensive in nature.

    Risks beyond human control

    Element of uncertainty

    Protection & Security for growth.

    RISK MANAGEMENT as a concept

    WHY

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    Risk identification

    Risk Avoidance

    Risk Reduction

    Risk Retention

    Risk analysis / measurement

    Risk transfer (by Insurance)

    RISK MANAGEMENT as a concept

    Managing & Risk Planning

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    12/20/2013 16

    RISK MANAGEMENT PROCESS

    IS THERE A RISK

    HAS IT BEEN MEASURED

    IS IT SIGNIFICANT

    ANALYSE RISK

    CAN IT BE AVOIDED OR ELIMINATED

    CAN IT BE REDUCED

    IS RESIDUAL RISK SIGNIFICANT

    IS IT A CATASTROPE RISK

    CAN IT BE RETAINED

    TRANSFER

    INSURE OTHER

    YES

    YES

    YES

    NO

    YES

    YES

    NO

    NO

    NONO

    NO

    DISREGARD

    YES

    AVOID / ELEMINATE

    NONO

    DISREGARD

    YESYES

    RETAIN RISK

    Identification

    Evaluation

    Control

    Financing

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    WHAT IS INSURANCE

    ?

    ??

    ???

    RISK MANAGEMENT as a concept

    Insurance

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    Insurance is a contractwhereby

    in return for the payment of premium

    by the insured ( the Owner),

    the insurers ( Company)

    pay the financial losses suffered by the

    insured

    as a result of the

    occurrence of unforeseen events.

    RISK MANAGEMENT as a concept

    Insurance

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    Utmost good faith

    Insurable interest

    Proximate cause.

    Indemnity

    RISK MANAGEMENT as a concept

    Basic Principles of Insurance

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    Both the Insured ( owner ) & the Insurer ( the Insurance company) are

    Parties to the contract, and are required to observe good faith in

    respect of the transaction.

    the seller.. insurer cannot mislead the buyer .. insured.

    the Owner .proposer has a legal duty to disclose all Material Information

    about the subject matter of insurance to the insurers.. Company

    Material information . enables to insurer to decide

    a) Whether they will accept the risk, &b) If so, at what rate of premium, &

    c) Subject to what terms and conditions

    RISK MANAGEMENT as a concept

    Basic Principles of Insurance

    Utmost Good faith

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    Insurable interest The owner of a property

    has a right to effect insurance on the property

    if he is likely to suffer financially

    when the property is lost or damaged

    to accident.

    This is a legal right which is called insurable interest.

    Without insurable interest, the contract of insurance will be void.

    RISK MANAGEMENT as a concept

    Basic Principles of Insurance

    Insurable Intrest

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    CLAIMS ARE PAID BY THE INSURERS,

    If the LOSS is

    PROXIMATELY CAUSED

    BY A PERIL

    INSURED AGAINST.

    RISK MANAGEMENT as a concept

    Basic Principles of Insurance

    Proximate Cause

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    Principle of indemnity states that under a policy of insurance,

    the insured after a loss is to be placed

    in the same financial position

    in which he was immediately before the occurrence of loss.

    Insured cannot recover more than his financial loss.

    Object of insurance is to protect the financial interest of the insured

    Limitation of Insurers liabilitya) If sum insured is less than the measure of indemnity, only sum insured is payable.

    b) Property insurances-Condition of averageIf there is under insurance only

    proportionate value is payable.

    C) Excess clauses

    RISK MANAGEMENT as a concept

    Basic Principles of Insurance

    Indemnity

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    In Public Sector there are two Insurance Companies L I C . Life Insurance Company .. Deals with Life Policy

    GIC General Insurance Company . Deals with Assests & Properties

    NICL. National Insurance Co.

    UIIC.. United India Insurance Co.

    OIC Oriental Insurance Co.

    NIAC .. New India Assurance Co.

    In Private Sector major names are

    IFFCO-TOKIO GEN. INS. CO. BAJAJ ALLIANZ GEN INS. CO.

    RELIANCE GEN. INS.CO.LTD.

    ICICI LOMB. GEN. INS.CO.LTD.

    TATA AIG GEN. INS.CO.LTD.

    ROYAL SUNDARAM INS CO.LTD.

    CHOLAMANDALAM MS GEN.CO.LTD

    HDFC CHUBB. GEN.INS CO.LTD.

    RISK MANAGEMENT as a concept

    the Insurer ????

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    25

    FIRE,EXPLOSION

    MACHINERY BREAKDOWN

    ELECTRICAL/

    ELECTRONIC

    DAMAGE

    MALICIOUS

    DAMAGE

    / ARSON

    NEGLIGENCE OF EMPLOYEES

    TRANSPORTATION DAMAGE

    ACCIDENTS

    STRIKE

    POLLUTION

    EFFECTS OF LIGHTININGS

    OR FIRES SPREADING

    FROM NEIGBOURHOODINSOLVENCY OF CLIENT

    DEFECTIVE

    PRODUCT

    THIRD PART

    CLAIMS

    IMPACT OF VEHICLES /

    AIRCRAFT

    EFFECTS OF INTERNAL FIRE / EXPLOSION

    NATURAL PERILS

    (STORM,EARTHQUAKE,.)

    RISK MANAGEMENT as a concept

    the Perils

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    CONVENTIONAL COVERS CUSTOMISEDCOVERS

    TARIFF NON TARIFF

    i) FIRE i)MARINE i) PACKAGE POLICY

    ii) MBD ii)SPL.CONT. ii) SPL.CONT.POLICY

    iii) CPM iii) GPAI ETC. (ON FIRST LOSS) ETC.

    iv) MVv) BE

    vi) EEI

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