Risk Management--Why and How - IRMI.com

1 Risk management Why and HowAn illustrative introduction to riskmanagement for business executivesRISK management WHY AND HOWAn illustrative introduction to risk management forbusiness executivesGeorge L. Head, , CPCU, ARM, CSP, CLUINTERNATIONAL RISK management INSTITUTE, 978 1 933686 16 5 Copyright 2009, International Risk management Institute, Inc. You may print this book fordistribution in its entirety at no cost to others if all IRMI branding and information remains inplace and no other branding or promotional material is included on or in the book.

2 You mayalso send the PDF file containing this book to others as an e-mail attachment as long as thebook is not altered in any way. All other rights are Merit Drive Suite 1450 Dallas, Texas 75251-2286 (972) 960 7693 International Risk management Institute, Inc., the owl logo, and IRMI are registered StatementAt IRMI, our mission is to be the premier authority in pro-viding expert advice and practical strategies for risk man-agement, insurance, and legal professionals. We willcontinuously earn our customers trust and confidence byempowering them with the most reliable and accurate in-formation, maintaining the highest levels of integrity in allthat we do, and quickly responding to their needs.

3 Risk management Why and How3Ta b l e o f C o n t e n t sForewordAbout the Basic We Manage for We Manage Evaluate Loss Exposed to from Statements and on Organizational management Why and HowOperating Appraise Feasible Risk management of Transfer for Risk Essentials3. Establish a Risk management Adapt to and To Start How To Risk management to Your a Definite Risk management Everyone Some Risk management Risk Control and Risk Risk management Why and How5 ForewordWhile it seems intimidating to many businesspeople possibly because of the unique vocab-ulary that risk and insurance professionals use the risk management process is not reallydifficult to understand.

4 It is simply a common-sense approach to using a number of readilyavailable tools to handle an organization s risk in the most cost-efficient manner possible. Tobe truly successful, however, risk management must permeate an organization. A risk man-ager or even a department full of risk managers cannot maximize the benefits of the processwithout the understanding, cooperation, and active support of others within the organization. Thus, one of the most important roles of risk pro-fessionals is educating others within their organi-zations (or their clients organizations) about theprocess and how to properly apply it.

5 For thisreason, we have had many requests over theyears to prepare a publication that provides asimple and easy-to-read explanation of the riskmanagement process a guide that insurance professionals could provide to their clients andrisk managers could give to business and financial managers to acquaint them with the riskmanagement process. That is why we jumped at the opportunity to commission Dr. George Head to write this intro-ductory text. George is a true pioneer of risk management education, and he has learnedover the years how to make it interesting.

6 Risk management : Why and How begins with acase study about a fire that destroys the Arapaho, a hypothetical garage and apartment com-plex in Georgia. George then explores ways the risk management process might have beenemployed to avoid the fire entirely, minimize the damage, or at least ensure a financial recov-ery by its owners. It is our sincere hope that Risk management : Why and How will fill the need for an easy-to-understand introduction to risk management and the risk management process for organiza-tions large and small.

7 To facilitate widespread distribution of Risk management : Why andHow, we have decided to make it available to select IRMI customers and friends at no have, however, taken the liberty of adding sidebars to introduce IRMI products and ser-vices that can help you apply the techniques discussed in the book. These appear in the IRMI Toolbox sidebars. 6 Risk management Why and HowAs you will see from the number of sidebars, theIRMI risk management library is extensive morethan 45,000 pages are included in our online full library may be more than you need if youare with a small organization or if you wear manyhats in a mid-size company.

8 If this is the case, I rec-ommend you take a look at two IRMI titles in particu-lar: Practical Risk management and 101 Ways toCut Business Insurance Costs. Practical Risk Man-agement covers all the topics discussed in RiskManagement in much more detail than here, but stillin small enough bites to be digestible and useful toany business executive charged with managing riskor buying insurance. 101 Ways to Cut Business In-surance Costs is an assembly of proven risk man-agement and insurance purchasing tactics for re-ducing the cost of the insurance policies thatbusinesses buy and which can be implemented byany insurance is a pleasure to make Risk management : Why andHow available to you.

9 Please share it with yourfriends, colleagues, and the best, Jack P. Gibson, CPCU, CRIS, ARMP residentInternational Risk management Institute, Inc. (IRMI)Dallas, TXIRMI Risk management Why and How7 About the AuthorThe holder of several professional designations in in-surance, safety, and risk management , Dr. Head hasbeen a risk management educator since he graduatedin 1967 with a doctorate in economics from the Whar-ton School of the University of Pennsylvania andjoined the American Institute for Chartered PropertyCasualty Underwriters in suburban his career, Dr.

10 Head developed and main-tained the curriculum and examinations for the Insti-tute s professional designation programs in risk man-agement and safety, earning career recognition awards from the American Risk andInsurance Association, the Risk and Insurance management Society, the Public Risk Man-agement Association, the American Society of Safety Engineers, the Institute of Risk Man-agement (British) and the International Insurance Society while contributing regularly to theirpublications as well as to the general risk management , insurance, and safety trade press.