![]() Writing a mission statement for risk management in the organization.They also create the risk management guideline for the firm that usually includes the following: The CRO or the financial risk managers take responsibility for these trades. For example, a cereal manufacturer, dependent upon a steady supply of grain used in production, may decide to enter into fixed-price long-term contractual arrangements with its suppliers to avoid the risk of price fluctuations. They also address the entire risk map A visual tool used to consider alternatives of the risk management tool set.-a visual tool used to consider alternatives of the risk management tool set-in the realm of nonpure risks. CROs oversee the increasing reliance on capital market instruments to hedge risk. Captives are separate insurance entities under the corporate structure-mostly for the exclusive use of the firm itself. In addition to insurance and loss control, risk managers or CROs use specialized tools to keep cash flow in-house, which we will discuss in Chapter 6 "The Insurance Solution and Institutions" and Chapter 7 "Insurance Operations". Risks cannot be segregated-they interact and affect one another. The role of CROs expanded the traditional role by integrating the firm’s silos, or separate risks, into a holistic framework. With this evolution, firms created the new post of chief risk officer (CRO). The traditional risk manager’s role has evolved, and corporations have begun to embrace enterprise risk management in which all risks are part of the process: pure, opportunity, and speculative risks. Risk managers use agents or brokers to make smart insurance and risk management decisions (agents and brokers are discussed in Chapter 7 "Insurance Operations"). Every time we lock our house or car, check the wiring system for problems, or pay an insurance premium, we are performing the same functions as a risk manager. In fact, each of us manage our own risks, whether we have studied risk management or not. In a small company or sole proprietorship, the owner usually performs the risk management function, establishing policy and making decisions. (retaining risks within the firm) and paying claims in-house requires additional personnel within the risk management function. ![]() Handling risks by self-insuring Retaining the risk within the firm. Typically, the traditional risk management position has reported to the corporate treasurer. Thus, risk managers sought to reduce the firm’s costs of pure risks and to initiate safety and disaster management. ![]() Most activities involved providing adequate insurance and implementing loss-control techniques so that the firm’s employees and property remained safe. The risk manager was charged with the responsibility for specific risks only. Traditionally, a firm’s risk management function ensured that the pure risks of losses were managed appropriately.
0 Comments
Leave a Reply. |