Topic 5 Risk Management Techniques Loss Control Activities Attempts to Control Risk Loss Exposures Risk Management Alternatives o 2 Broad Categories Risk Control Risk Financing o Risk Control Objectives Goals Decrease Frequency Decrease Severity Or Both Improve Variability of Losses o Less Variable o Objective Risk Data Quantifying o Decrease Coefficients of Variation Avoidance perfect Risk Control measure because you don t do it o Stop engaging in activity causing loss o Never engage in activity to begin with o If it is properly implemented then Frequency 0 Problems With Avoidance o One can t avoid everything Death Natural Disasters Terrorism o Opportunity Cost avoid one loss you may be exposed to another loss By Avoiding you lose potential profit revenue and if you o EXAMPLE Fleet of cars is being outsourced still potential risks downsides Still have drivers But you have less control Perform background checks Incur new expense Depending on supply chain who relies on 3rd party Reputation Quality suffers Legacy Costs o Responsible for prior acts or activities o One of biggest Legacy Costs Asbestes Insulation used for fire prevention in homes o Underground Oil Tanks Pollution exposure Oil spill Loss Control Loss Prevention goal of reducing frequency o Doesn t completely eliminate the loss but may have an impact on severity o Main Goal Impact Frequency o Looking to interrupt of break chain of events prior to loss Measures Safety security training walk around asking questions walk and talk Loss Reduction o Assume Loss will or has occurred o Goal is to reduce severity less money lost o What could be done to minimize severity o Disaster Recovery Debrief What worked What didn t Post Loss Reduction Activities i e PA Turnpike crash during snow o Diligent Record keeping Photos Videos o Fix what caused loss But are you admitting to Negligence o Subsequent Remedial Measures Repairs aren t held against owner Benefit to society o EXAMPLES Training Light duty Product Recalls Salvage Car accident totaled car taken by insurance company Crisis Management Risk Control Separation of exposure units separate o EXAMPLE o Breakdown items assets activities responsibilities into smaller parts and Fleet 1 Garage Fire Occurs Loss of entire fleet Build another garage Rent 2nd garage Incurring new expense Lost Cost Benefit Analysis Limits size of loss from any single occurrence decreasing severity reduces income loss may result in increased expenses Duplicate Exposure Units Key assets that can be replicated Key could lose it Must be held in reserve critical not to use it because if you don t use it you o EXAMPLES Computer data technology documents generator Test to be sure it s operationally fit Does it work Risk Transfer Shifting Loss Exposure Shifting activity or asset that s exposed to loss to a 3rd party o Lease Fleet maintenance Insurance o Rent Lease garage read contract o Due Diligence references background checks o Potentially less expensive when you transfer risk Security Services for Temple as example Want 3rd party to be responsible due diligence In position to know or should have known Social Media Best way to perform due diligence o EXAMPLE Fox Chase Cancer Center now temple owned Malpractice HR practices building financial standing Reputation
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