Principles of Risk Management and Insurance, 13th Edition

Chapter 3 Introduction To Risk Management

“The essence of risk management lies in maximizing ­the areas where we have some control over the outcome while minimizing the areas where we have absolutely no control over the outcome.”

Peter L. Bernstein

Against the Gods: The Remarkable Story of Risk

Learning Objectives

After studying this chapter, you should be able to

• Define risk management and explain the objectives of risk management.

• Describe the steps in the risk management process.

• Explain the major risk-control techniques, including

  • – Avoidance

  • – Loss prevention

  • – Loss reduction

  • – Duplication

  • – Separation

  • – Diversification

• Explain the major risk-financing techniques, including

  • – Retention

  • – Noninsurance transfers

  • – Insurance

• Apply the principles ...