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Risk & Uncertainty in Insurance

In: Business and Management

Submitted By asher27
Words 370
Pages 2
Meaning of Risk: Risk is defined as the probability of an event and its consequences. Risk management is the practice of using processes, methods and tools for managing these risks.
Meaning of Uncertainty: Uncertainty is a state where the extent of risk and when the risk hits is unknown, (ie) – we know what the risk is but are uncertain of the outcome yet.
The main categories of risk to consider are:
• Strategic Risk: Strategic risks are those risks associated with operating in a particular industry. - for example a competitor coming on to the market
• Compliance: Compliance risks are those associated with the need to comply with laws and regulations. They also apply to the need to act in a manner which investors and customers expect, for example, by ensuring proper corporate governance.- for example the introduction of new health and safety legislation
• Financial: Financial risks are associated with the financial structure of your business, the transactions your business makes and the financial systems you already have in place. -for example non-payment by a customer or increased interest charges on a business loan
• Operational: Operational risks are associated with your business' operational and administrative procedures- for example the breakdown or theft of key equipment
Other risks include:
• environmental risks, including natural disasters
• employee risk management, such as maintaining sufficient staff numbers and cover, employee safety and up-to-date skills
• political and economic instability in any foreign markets you export goods to
• health and safety risks
Risk evaluation allows you to determine the significance of risks to the business and decide to accept the specific risk or take action to prevent or minimize it. To evaluate risks; it is worthwhile ranking these risks once you have identified them. This can be done by...

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