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Concept & Application

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˜ î passing the lighter vein and coming to the

heart of the serious business, which RISK is
all about.
˜ Risk is what an individual or an organization
or a s stem encounters in the form of an
outcome of an action, different from the
aspired and anticipated one.
 

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˜ eople from different streams have their own

perception about risk.
˜ An economist¶s perception ma differ from Insurer¶s
perception.
˜ A notion of indeterminate outcome is implicit in all
definition of risk.
˜ When risk is said to exist, there must be atleast two
possible outcomes.
˜ Favorable or unfavorable depend upon the benefits
or loss.
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˜ uncertaint is the ps chological reaction to

the absence of knowledge about the future.
˜ The existence of risk creates uncertaint on
the part of individuals when that risk is
recognized.
˜ The degree of risk depend upon the
probabilit of occurrence of event.
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˜ eril is a cause of loss.

˜ On the other hand Hazard is a condition
which increase the chance of loss from a
given peril.
˜ It is possible for something to be peril as well
as hazard e.g. Sickness.
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˜ h sical Hazard
˜ Moral Hazard
˜ Morale Hazard
˜ Legal Hazard
 

 
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˜ S stematic Risks & uns stematic Risks

˜ Financial & Non-financial Risks
˜ Static & D namic Risks
˜ Fundamental & articular Risks
˜ ure & Speculative Risks (Most useful
distinction)
 

 
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˜ ersonal risks
˜ ropert risks
˜ Liabilit risks
˜ Risk arising from failure of others
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˜ On Individual or famil
˜ On a group or societ
˜ On Countr
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˜ Hazard risks are those risks that have

traditionall been addressed b insurers,
including fire, theft, windstorm, liabilit ,
business interruption, pollution, health and
pensions.
˜ Financial risks cover potential losses due to
changes in financial markets, including
interest rates, foreign exchange rates,
commodit prices, liquidit risks and credit
risk.
 


˜ Operational risks cover a wide variet of

situations, including customer satisfaction,
product development, product failure,
trademark protection, corporate leadership,
information technolog , and management
fraud and information risk.
 
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˜ Strategic risks include such factors as

completion, customer preferences,
technological innovation and regulator or
political impediments.
˜ Although there can be disagreement over
which categor would appl to a specific
instance, the primar point is that enterprise
risk management considers all t pes of risk
an organization faces.
  
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˜ Changing scenario about insurable risks.
˜ Other wa s to insure Speculative risks.