Principles of Risk Management and Insurance, 13th Edition

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. Because the term risk is ambiguous and has different meanings, risk managers typically use the term loss exposure to identify potential losses. As stated in Chapter 1, a loss exposure is any situation or circumstance in which a loss is possible, regardless of whether a loss actually occurs. In the past, risk managers generally considered only pure loss exposures faced by the firm. However, new forms of risk management have emerged that consider both pure and speculative loss exposures. This chapter discusses only the traditional treatment of pure loss exposures. ...