Chapter 3 Introduction to Risk Management Meaning of risk management Objectives of risk management Steps in the RM Process Benefits of risk management Personal rm Corporate RM Corporate Value of ERM (FMEA ENTERPRISE RISK MANAGEMENT The Next step in Business Management 3-1
3-1 Chapter 3 Introduction to Risk Management • Meaning of Risk Management • Objectives of Risk Management • Steps in the RM Process • Benefits of Risk Management • Personal RM • Corporate RM – ERM （FMEA）
Meaning of Risk Management Risk Management is a process that identifies loss exposures faced by an organization and selects the most appropriate techniques Tor treating such exposures A loss exposure is any situation or circumstance in which a loss is possible, regardless of whether a loss occurs E.g., a manufacturing plant that may be damaged by an earthquake or an automobile that may be damaged in a collision 3-2
3-2 Meaning of Risk Management • Risk Management is a process that identifies loss exposures faced by an organization and selects the most appropriate techniques for treating such exposures • A loss exposure is any situation or circumstance in which a loss is possible, regardless of whether a loss occurs – E.g., a manufacturing plant that may be damaged by an earthquake, or an automobile that may be damaged in a collision
Objectives of risk Management Risk management has objectives before and after a loss occurs Pre-loss objectives Prepare for potential losses in the most economIcal way Reduce anxiety Meet any legal obligations 3-3
3-3 Objectives of Risk Management • Risk management has objectives before and after a loss occurs • Pre-loss objectives: – Prepare for potential losses in the most economical way – Reduce anxiety – Meet any legal obligations
Objectives of risk Management Post-loss objectives Ensure survival of the firm Continue operations Stabilize earnings Maintain growth Minimize the effects that a loss will have on other persons and on society 3-4
3-4 Objectives of Risk Management • Post-loss objectives: – Ensure survival of the firm – Continue operations – Stabilize earnings – Maintain growth – Minimize the effects that a loss will have on other persons and on society
Risk Management Process Identify potential losses Evaluate potential losses Select the appropriate risk management technique Implement and monitor the risk management program 3-5
3-5 Risk Management Process • Identify potential losses • Evaluate potential losses • Select the appropriate risk management technique • Implement and monitor the risk management program