Commercial property risk management physical and financial consequences of accidental loss can prevent the organization from achieving its objectives or even become bankrupt Organizations must manage their loss exposures through prevention reduction and by establishing a plan to finance any unavoidable losses attempt to manage their loss exposures through risk control measures such as preventing accidents applying risk control techniques to reduce the size of losses that occur and purchasing insurance or using some other method to finance those losses that cannot be prevented or reduced risk financing pays for losses that still occur insurance definition of commercial property insurance broad aggregate definition all types of commercial property insurance covering property loss and related net income loss broad definition encompasses all types of commercial property insurance such as commercial property crime and inland marine insurance narrow singular definition one particular type of commercial property insurance that covers loss or damage to buildings and business personal property at specified locations narrow definition denotes one of the specific types of commercial property crime insurance or inland marine insurance 6 step rmin process 1 identify loss exposures ex property loss exposure losses resulting from damage such as costs to repair damaged or destroyed office buildings Losses resulting from theft and costs of relocating during a damaged building is being repaired 2 Analyzing loss exposures determine the likelihood and probable extent Ex loss reduction installing a sprinkler system to prevent fire damage 3 Examining feasibility of risk techniques consider costs associated with each teqhnique to determine feasibility ex installing a sprinkler system might not be feasible bc the cost and potential work interruption while purchasing insurance and establishing arrangements for temporary relocation for the business might be feasible 4 Selecting appropriate risk management techniqes feasibility should assist in choosing best techniques 5 Implementing the selected rmin techniques ex could include arranging meetings with organizations with whch the organization could potentially establish a resource sharing agreement selecting a partner organization and establishing the plan Could also include meeting with an insurance agent to procure the best policy to meet the organization s needs 6 Monitoring the results and revising the rmin program examples staging trial runs with the resource organization to make sure systems could handle the increased work load that such an arrangement could entail reviewing organizational policies that could influence the success of such arrangement and annually reviewing insurance coverages and limits to ensure that the organizations needs continue to be met RMIN techniques Risk Control Techniques Avoidance eliminates any possibility of loss proactive avoidance not assuming a loss exposure in the first place abandonment eliminating a loss exposure that already exists Loss prevention involves reducing the frequency of a particular loss Loss reduction involves reducing the severity of a particular loss Separation involves dispersing a particular activity or asset over several locations Involves the routine daily reliance on each of the separated assets or activities all of which regularly form a portion of the organization s working resources Duplication involves relying on backups that is spares or duplicates used only if primary assets or activities suffer loss Diversification involves providing a range of products and services used by a variety of customers Risk Financing Techniques Retention involves generating funds from within the organization to pay for losses Transfer involves generating funds from outside the organization to pay for losses includes insurance and noninsurance transfer Risk Control and Commercial Property Loss Exposures most losses result from a chain of events Specific risk control measures provide valuable property protection and are applicable to property losses caused by these events fire burglary robbery and employee theft explosion windstorm flood earthquake 2 different risk control approaches to these engineering approach attacks hazards by reviewing and improving the design and location of properties and equipment to reduce the number of hazards Human behavior approach attacks hazards by modifying people s behaviors to reduce the frequency of unsafe acts Fire requires 3 elements an initial source of heat oxygen and fuel A fourth element and an uninterrupted chain reaction causes the fire to flame up and spread Construction type influences fire control fire resistance of contruction wood frame more combustible than joisted masonary brick stone concrete Joisted masonary more combustible than noncombustible construction metal gypsum