风险管理与保险全套教案英文版.doc

1 CHAPTER 1 Introduction to Risk THE BURDEN OF RISK DEFINITIONS OF RISK Pure versus Speculative Risk Static versus Dynamic Risk Subjective versus Objective Risk SOURCES OF PURE RISK Property Risks Liability Risks Life Health and Loss of Income Risks Financial Risk MEASUREMENT OF RISK Chance of Loss Physical Hazard Morale Hazard Moral Hazard Degree of Risk MANAGEMENT OF RISK KEY TERMS AND CONCEPTS Chance of loss Chief risk officer Cost of risk Degree of risk Dynamic risks Enterprise risk management Financial risks Frequency Hazards Integrated risk management Moral hazard Morale hazard Objective risk Peril Pure risk Risk Risk management Risk management process Risk manager Severity Speculative risk Static risks Subjective risk ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1 Risk can be defined as uncertainty as to loss Risk can create an economic burden by requiring reserve funds to pay for contingent losses and price increases of some goods and services Risk may deprive society of some goods and services that are determined to involve too much risk to justify their production 2 a Pure risk involves uncertainty as to whether loss will occur It does not involve a possibility of gain Speculative risk involves uncertainty about an event that could produce either a profit or loss b Static risks are those that would exist in an unchanging society that is in stable equilibrium Dynamic risks are caused by societal changes c Subjective risks arise from psychological uncertainty that is based on an individual s mental attitude or state of mind Objective risk is more precisely observable and measurable Chapter 2 Risk Identification and Evaluation2 3 Windstorm flood and other natural disasters are examples of risks that are both pure and static 4 A peril is a specific contingency that may cause loss A hazard is a condition that introduces or increases the chance of loss from the existence of a given peril Examples of perils include fire windstorm collision war etc Examples of hazards include oily rags icy roads a dishonest employee a careless driver etc 5 aMorale b Moral c Morale d Moral e Physical 6 Risk management is the process used to systematically manage exposures to pure risk The four steps are 1 identify risks 2 evaluate risks 3 select risk management techniques and 4 implement and review decisions Traditionally risk management has dealt primarily with pure risks Enterprise risk management considers all of an entity s risks together both pure and speculative 7 As a loss becomes more and more certain to happen there is less and less uncertainty that it will not happen If a point is finally reached when an event is certain to occur then there is no risk at all 8 Company ABC 70 60 65 15 percent Company XYZ 80 50 65 46 percent 9 a Collision or oil spill b Flood c Fire or explosion d Death e Theft or vandalism 10 Answers will vary It can be pointed out that the mathematical value of the game is 0 90 1 000 0 10 100 000 10 900 and a gambler should choose the game Most students will probably choose the cash Since most persons are risk averting and will take the certain amount ventures like the game similar to real life investments bearing considerable risk and low probabilities for hitting it big e g oil drilling are not widely sought Hence the capital cost of such ventures must be high in order to overcome risk This high cost is the economic burden imposed by risk because it will produce higher consumer prices for the final product 11 A has the greater risk B has the greater probability of loss Using the objective risk formula Probable Variation of Loss Probable Losses we get 3 2 150 for A and 12 30 40 for B The probable loss is 2 100 2 for A and 30 1 000 3 for B 12 This question opens an opportunity to discuss subjective risk and its effect on economic or buyer behavior Information and explanation is a major industry today and much of its effort is designed to smooth the course of commerce by reducing perceived risk in the minds of customers Information reduces perceived risk by making it easier for the buyer to understand the product and the ways in which the product will solve problems for the buyer The purpose of course is to make it easier for the buyer to come to an intelligent buying decision 13 Risk is defined as uncertainty as to loss and variation is a measure of uncertainty Expected annual loss is not a measure of uncertainty There is a higher degree of risk when there is a lower probability of occurrence because as a loss becomes more certain to occur there is less uncertainty that it will not occur Risk would totally disappear only when the probability of occurrence is 0 and 100 14 Property losses would be easiest to estimate because the value of the property concerned can help in estimating the maximum possible loss Liability risks would be difficult to estimate because they are subject to wide variation and are contingent on several factors both within and outside of the company s direct control Personal risks are also difficult to estimate because evaluation Chapter 2 Risk Identification and Evaluation3 involves such problems as placing a value on human life or health which can be a very difficult undertaking SUPPLEMENTARY QUESTIONS 1 What is involved in an entity s cost of risk An entity s cost of risk is the sum of its 1 outlays to reduce risks 2 opportunity cost of activities foregone due to risk considerations 3 expenses of strategies to finance potential losses and 4 the cost of unreimbursed losses 2 What words if any should be substituted for risk in the following statements to make them more accurate a When children play with fire in a dry forest a serious risk is present b An icy highway is a risk factor in safe driving c To underwrite this risk is dangerous d Flood is a risk that we will not retain e You don t have a large enough group of people to enable us to reduce the risk sufficiently to handle this on a group basis a hazard b hazardous c exposure unit d peril e Risk is used properly since the statement refers to uncertainty The statement might be improved however by using degree of risk 3 What type of risk is involved in betting on a sports game How would your answer change if the game had already been played and you knew the results of the game before the bet Speculative risk is involved in betting If the outcome was already known before the bet then there would be no risk involved An exception would be the personal risk involved with the chance of the person finding out that you had prior knowledge CHAPTER 2 Risk Identification and Evaluation RISK IDENTIFICATION Loss Exposure Checklists Financial Statement Analysis Flowcharts Contract Analysis On Site Inspections Statistical Analysis of Past Losses RISK EVALUATION Risk Mapping or Profiling Statistical Concepts Probability Measures of Central Tendency or Location Measures of Variation Chapter 2 Risk Identification and Evaluation4 Loss Distributions Used in Risk Management The Binomial Distribution The Normal Distribution The Poisson Distribution Integrated Risk Measures ACCURACY OF PREDICTIONS Law of Large Numbers Number of Exposure Units Required KEY TERMS AND CONCEPTS Binomial formula Coefficient of variation Continuous Contractual liability Discrete Empirical probability distribution Expected value Financial statement analysis Flowchart Independent Law of large numbers Loss exposure Loss exposure checklist Maximum possible loss Maximum probable loss Mean Measures of central tendency Median Mode Normal distribution Poisson distribution Probability Probability distribution Random Risk adjusted return on capital RAROC Risk management information system RMIS Risk mapping Risk profiling Standard deviation Theoretical probability distribution Value at risk VAR Variance ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1 One method uses loss exposure checklists that enumerate various specific sources of loss Another is the financial statement method that involves analyzing each item on a firm s income statement and balance sheet regarding risks that may be present A third method uses flowcharts to map out the physical flow of goods Flowcharts can be analyzed with respect to the types of risks that may affect goods at each point 2 The important elements are the frequency and severity of an occurrence the maximum probable loss and the maximum possible loss 3 A risk manager can use the information from a distribution to approximate the actual experience This information is useful for monitoring past losses and predicting future losses 4 The first peril produces an expected annual loss of 20 000 0 02 1 000 000 The other peril produces an expected annual loss of 20 000 20 1 000 5 The mean is 2 40 3 4 3 3 1 0 2 2 3 3 10 The median is 3 rearrange from 0 to 4 like this 0 1 2 2 3 3 3 3 3 4 and take the value between the fifth and sixth values which are both Chapter 3 Property and Liability Loss Exposures5 3s The mode is 3 since it shows up the most times The variance calculation is LossesMean LossDeviation from MeanSquared Deviation 02 40 2 405 76 12 40 1 401 96 22 40 0 400 16 22 40 0 400 16 32 40 0 600 36 32 40 0 600 36 32 40 0 600 36 32 40 0 600 36 32 40 0 600 36 42 40 1 602 56 Total 24 Total 12 40 Variance 12 40 10 1 24 Standard Deviation 1 24 1 11 Coefficient of Variation 1 11 2 40 46 25 6 MDC Corporation s probable range of losses are from 4 000 to 16 000 2 000 3 6 000 6 000 10 000 with 99 confidence If only 95 confidence was needed the range would be from 6 000 to 14 000 2 000 2 4 000 4 000 10 000 7 Callaghan Company s probable range of losses are from 67 000 to 83 000 4 000 2 8 000 8 000 75 000 with 95 confidence 8 The first step to calculate QAZ Company s probability of 2 or fewer losses which is the same as 3 or more losses is to calculate the mean which is 5 100 0 05 Then substitute in to the Poisson formula and solve for each p probability that meets the conditions The first p is 0 006738 50e 5 0 The second p is 0 03369 51e 5 1 The third p is 0 08422 52e 5 2 These probabilities are then added up and the sum is subtracted from 1 which is 0 87535 1 0 12465 9 The objective risk would decrease As the number of exposure units increases the predictability of the number of losses increases That in turn causes a decrease in the amount of risk This phenomenon illustrates the law of large numbers 10 WFS could use informal techniques of evaluation to categorize probabilities of losses Knowing the values of assets WFS could use the concepts of maximum possible loss as well as maximum probable loss Because WFS Corporation does not have a large number of exposure units most of the statistical techniques would not apply However using industrywide data on losses past year s experience and any change in exposures that affect the likelihood of a loss may be helpful 11 a The company that brings together in two airplane flights nearly all of its dealers and distributors faces a major business interruption exposure If nearly all of the dealers and distributors are killed in a plane crash then a good part of the company s products may not be able to get to the customers If the company owns the planes it faces property and liability exposures Also some of the dealers may owe the company for past sales and in the event of a crash the company may not be able to collect what it is owed Chapter 3 Property and Liability Loss Exposures6 b The company that makes the contract with the foreign country risks the nationalization of their assets if the country becomes unstable There are property exposures if something happens to the special machinery during shipment Also late delivery could cause extra customs charges 12 Data such as dates of past injury causes of losses and property values would be useful to any firm An auto manufacturer could use industry specific data such as the number of back injuries of all manufacturers safety regulations liability claims resulting from drivers that deliver the cars pollution emissions from the factories etc A theme park may be more concerned with the liability exposures resulting from injury to its guests The theme park may collect more detailed information about the safety features of the rides past losses on rollercoasters past injuries of guests and employees and where the injuries happened most often data on line movement how long people must stand in the sun etc 13 A large multinational corporation will have numerous exposures to risk both pure and speculative An advantage of using RAROC is that managers contemplating various projects are forced to consider the cost of risk in evaluating the potential profitability of those projects Another advantage is that risk must be anticipated in advance thereby lessening the likelihood that potential risks will be nintentionally retained A disadvantage of RAROC is the additional cost associated with RAROC calculations SUPPLEMENTARY QUESTIONS 1 Why would a risk manager use statistical techniques Information is the key tool for all managers whether they manage risk or anything else Statistics makes information out of data information that can help the risk manager make good decisions about managing losses 2 RBF s production company is considering purchasing a risk management information system RMIS to do statistical analysis of property to sets filming equipment etc and liability from contractual transfer to slips and falls losses What functions should this software have The software should be able to do some of the statistical calculations mentioned in the chapter such as the measures of central tendency the various distributions and the measures of variation It should also have report writing capability and claims management capability The ability to do risk mapping as well as value at risk and risk adjusted return on capital RAROC are increasingly becoming available from RMIS systems Finally there are other functions that certain industries or companies may need more than others so a thorough needs analysis should be done before an RMIS is purchased 3 Why should a risk manager be careful when using the statistical tools in this chapter Mathematical tools make many assumptions and therefore must be used with great caution Only experienced and knowledgeable persons should interpret results that may lead to specific company applications CHAPTER 3 Chapter 3 Property and Liability Loss Exposures7 Property and Liability Loss Exposures PROPERTY LOSS EXPOSURES Sex and Property Loss Exposures LIABILITY EXPOSURES The High Cost of Airplane Crashes and Other Liability TYPES OF LIABILITY DAMAGES Bodily Injury Property Damage Personal Injury Legal Expenses CRIMINAL AND CIVIL LAW TORTS BASIC LAW OF NEGLIGENCE The Negligent Act A Negative Act A Voluntary Act An Imputed Act Proximate Cause of the Loss DEFENSES AGAINST NEGLIGENCE CLAIMS Contributory Negligence Assumed Risk Guest Host Statutes FACTORS LEADING TO HIGHER STANDARDS OF CARE Expanding Application of Liability Weakening of Defenses against Liability Res Ipsa Loquitur Expansion of Imputed Liability Changing Concepts of Damage Increased Damage Awards TYPES OF LIABILITY EXPOSURES Contractual Liability Employer Employee Liability Property Owner Tenant Liability Assumption of Liability by Tenant Attractive Nuisance Doctrine Consumption or Use of Products Breach of Warranty Strict Tort Negligence Completed Operations of a Contractor Professional Acts Principal Agent Liability Ownership and Operation of Automobiles Chapter 3 Property and Liability Loss Exposures8 Liability of the Operator Liability of the Owner Nonoperator Liability of Employers MISCELLANEOUS LIABILITY INTEGRATED RISK EXPOSURES KEY TERMS AND CONCEPTS Attractive nuisance doctrine Collateral source rule Civil law Common law Comparative negligence Completed operations liability Contributory negligence Criminal law Direct loss Family purpose doctrine Guest host statutes Hard markets Imputed acts Indirect loss Invitees Joint and several liability Lack of privity Last clear chance rule Legal injury Libel Licensees Negative act Negligence Pain and suffering damages Personal property Positive act Professional liability Punitive damages Real property Res ipsa loquitur Respondeat superior Slander Soft market Superfund legislation Tort Tort feasor Trespassers Underwriting cycle Vicarious liability Voluntary act ANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION 1 Negative act voluntary act imputed act and proximate cause of loss are the elements of a negative act 2 Contributory negligence other party was also at fault Assumed risk plaintiff knew of danger of the risk and participated in the event Should be willing to assume the loss Guest Host operator of a vehicle not liable to a guest unless grossly negligent 3 Bodily injury medical services loss of income rehabilitation expenses loss of services pain and suffering punitive damages Personal injury libel slander invasion of privacy 4 Invitee invited on the premises such as the customer of a business Licensee on premises for a legal purpose such as a Mail Carrier Trespasser any other person such as a robber 5 The attractive nuisance doctrine is a legal doctrine that transforms the status of a trespassing minor to that of an invitee It says that an unusual condition of the premises invites the minor to the premises 6 Res ipsa loquitur is a legal doctrine that allows the plaintiff to collect even though the plaintiff cannot or does not prove the defendant negligent It is useful in medical malpractice because the doctor has total control of the situation especially surgery and if something goes wrong the plaintiff does not cause the error or contribute to it 7 The owner a user and a lessee may be held responsible for the operation of an auto Also if someone uses an auto on your behalf you can be held liable Chapter 7 Insurance as a Risk Management Technique Policy Provisions9 8 The insurance industry is supporting these types of tort reform imposing restriction on rights to sue limiting punitive dam