1. RISK MANAGEMENT
MEETING 14
Manaj. Perhotelan

2. Organizational Objectives
Profit
Operating Efficiency
Continuous Operations
Stable Earnings or
Revenue Stream
Growth
Legal Compliance
Humanitarian Concerns
Reputation

3. Risk Management
A system for planning, organizing, leading, and controlling the resources and activities that an organization needs to protect itself from the adverse effects of accidental losses.
Goal- To reduce the exposure to loss for the organization.

4. Risk Management Objectives
Pre-Loss
Economy of RM Operations
Tolerable Uncertainty
Legality
Ethical Approach
Social Responsibility
Post-Loss
Survival
Continuity of Operations
Profitability
Stable Earnings/Revenue
Social Responsibility
Growth

5. Risk Management Responsibilities:
Communication
Strategy/General
Safety/Loss Control
Claims Management
Risk Financing
Claims Analysis
RM Advice
Risk Management Advice
Management Reporting
Administration

6. Key Partnership Building
Executive Management
Internal Audit
Operations/Unions
Human Resources
Benefits
Safety/Security
Risk Management
(Traditional Role)
Planning
Construction
Real Estate
Legal
Contracts Admin.
Regulatory Compliance
Insurers
3rd Party Administrators
Finance
Accounting
Brokers

7. Major Types of Exposures
Property
Buildings-Business Personal Property
Rolling Stock- Personal Property of Others
Liability
Legally Enforceable Obligation
Personnel
Key Personnel and Officers and Directors
Net Income
Revenue Reduction/Expense Increase/Both

8. Basic Risk Management Decision-Making Process
Identify Exposures to Loss. (Analyze)
Examine Feasibility of Alternative Techniques
Select Most Suitable Technique
Implement Chosen Technique
Monitor and Evaluate Performance of the Risk Management Program. Modify as needed.

9. Step 1-Identify/Analyze Exposures to Risk
Standardized Surveys/Questionnaires
Financial Statements (Budget-P&L-CAFR)
Records and Files
Flowcharts (Fault Tree Analysis)
Personal Inspections
Experts (Internal & External)
Benchmarking

10. Step 1-Identify/Analyze Exposures to Risk
“Benchmarking is the practice of being humble enough to admit that someone else is better at something, and being wise enough to learn how to match or even surpass them at it.”
Unknown

11. Risk Management Techniques
Avoidance- Ceasing or not undertaking an activity that creates exposures to loss.
Loss Prevention- A technique that reduces frequency of a particular loss.
Loss Control - A technique that reduces the severity of a particular loss.
Risk Transfer - Shifts the financial consequences of loss to another party or insurer.
Risk Finance - An conscious act or decision not to act that generates the funds to pay for losses.

12. Step 2-Examine Feasibility of Alternative Techniques
Loss Frequency
Loss Severity
Maximum Possible Loss (MPL)
Probable Maximum Loss (PML)
and Loss Severity Interaction

13. Basic Approach Frequency and Severity Interaction
Frequency Severity Remedy
High
Avoid
Low
Retain
Transfer

14. Risk Mapping Approach Frequency and Severity Interaction
High Severity
Low Severity
Low Frequency
High Frequency
High Impact
Low Likelihood
Transfer
High Likelihood
Avoid
Low Impact
Retain 5
2.5
2.5 5

15. Too Late For A Break?

16. Risk Management Techniques Loss Prevention- Pre-Loss Activity
System and Behavioral Safety
Training
Good Housekeeping and Proper Storage Practices
Proper Installation and Maintenance of Equipment
Accepted Procedures for Welding, Hazardous Material Handling
Adherence to Safe Work Procedures
Machinery Guards
Improved Building Materials

17. Risk Management Techniques Loss Control- Concurrent Loss Activity
Loss Control Devices/Materials - Products that are triggered during a loss or are made with special material to control severity of injury and/or destruction of property.
Separation - Disperses a particular asset or activity over several locations.
Duplication - Uses back-ups, spares or copies of critical property, information or capabilities and keeps them in reserve.

18. Risk Management Techniques Risk Transfer
Contractual Risk Transfer-
Indemnity Agreements
Hold Harmless Agreements
Insurance Requirements
OCIPS and CCIPS
Financial Capacity of Insurers
Additional Insured Agreements
Waivers of Subrogation
Proof of Coverage
Certificates
Insurance Policy Endorsements
Obtaining Certified Copies of Policies

19. Risk Management Techniques Risk Transfer
Insurance- A technique that transfers the potential financial consequences of certain specified loss exposures from the insured to the insurer at a guaranteed cost.
Declarations
Insuring Agreements
Conditions
Exclusions

20. Risk Management Techniques Common Insurance Coverages
Liability
Auto Liability
Privacy and Security Liability (Cyber)
Workers’ Compensation
Employer’s Liability
Employment Practices Liability
Environmental Liability
Property
Earthquake
Flood
Business Travel Accident
Builder’s Risk
Railroad Protective
Crime

21. Risk Management Techniques Risk Finance
Insurance- Used as a finance technique for catastrophic losses.
Self-Insurance- A technique that described special situations in which risk retention has been consciously selected as the appropriate risk management technique.
Large Deductible Program- insurer assumes full statutory liability while employer retains a significant portion of the risk.

22. Factors in Designing Risk Financing Programs
Expected Losses
Market Conditions
Corporate Philosophy
Risk Control Commitment
Financial Position
Geographical Locations
Loss Payout Patterns
Effective Tax Rate
Corporate Ownership
Cash Flow Comparisons

23. Factors in Designing Risk Financing Programs
Net Present Value
Today’s $ is worth more than tomorrow’s $ because of investment income implications.

24. Qualified Self Insurance
Formalized retention program
Excess insurance purchased for losses exceeding limit
Qualification requirements vary by state
Positive cash flow
Ability to influence program costs
Unbundled services
Administrative requirements

25. Definition of Large Deductible Program
A policy in which the insurer assumes full statutory liability to all workers within the scope of coverage, in the same manner as any other workers’ compensation policy, while the employer assumes a contractual obligation to the insurer under which the employer retains a significant portion of the risk.

26. Large Deductible Loss retention plan
Excess insurance covers losses above deductible
Positive cash flow
Ability to influence program costs
Access to insurer services
Collateral requirements
Tax deduction disadvantage

27. Costs Included Expected losses Primary and excess premiums
Claims handling
Taxes
Assessments
Loss Control
Broker fees
Collateral
Fronting costs
Residual market loads
Boards and bureaus
State funds

28. Questions?