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Risk Management
Risk Manager
Risk Defined
Financial Loss
Non Economic Risks
Economic Risks
1
Pure Risks
Speculative Risks
1
2
Fundamentel Risks
2 Greene Mrk et. Al. Risk and ins., 8 th edition, U. S. A., Sauth western
publishing company, p. 49
Particular Risks
Static Risks
Dynamic Risks
Perils
Harzards
Physical Hazards
Morale Hazards
Moral Hazards
Personal Perils
Property and Liability Perils
Fundamental Perils
Particular Perils
identAcc
Loss
Total Loss
Partial Loss
Direct Loss
Indirect Loss
Factors of Risk Measurement
Degree of Risk
Probability of loss
Chance of loss
Mathematical Probability
Probability
Imperical Probabiltiy
:Expected Probability
:Actual or realized Probability
Low of
Large Numbers
5000
4800
5000
200 0.04 =
5000
3200 0.64 =
5000
1200 0.24 =
5000
400 0.08 =
5000
150 0.03 =
5000
50 0.01 =
5000
1200 400 150 50 +++
5000
1800
5000
400 150 50
5000
600 12.0
++==
5000
150 50
5000
200 0.4
+==
5000
50 0.01 =
5000
1200 3200
5000
4400 0.88
+==
5000
400 1200 3200
5000
4800 0.96
++==
5000
150 400 1200 3200
5000
4950 0.99
+++==
5000
50 150 400 200 3200
5000
5000 00.1
++++==
3
Expected losl Severity
)3
4
1
2
1000 +
2
1
2
1000 - 2000
Loss frequency
Loss Severity
Ruin of the Business
10000 100
150
100
110
The maximum possible loss and the maximum probable
Expectation of loss or Mathematical Expectation
)1
1(
+
2000
4000 60
2000
60
5000
1000 )
1 0.12
1(20
1) 12.0(20 +
5000
1000
1000
482
1000
261
1000
123
1000
74
1000
33
1000
19
1000
8
2
8.300
2.0
0963.0
2.0
0522.0
Probability Distribution of Total Losses
The maximum
Probable Yearly Aggregate Loss
The Maximum Probable Loss
Ruin Probability
Yardstick
Standard Deviation
Variance
2
2
2
2
Coefficient of Variation
}{
}{
4
4 Hossak I.B.et.al Introductory statistics with Opplication in general
Ins. 1 st edition, U. K, compridge university press, 1983, p. 101
Chebysheve
Inequality
1
1
1
5.1
1
2
2
2
1
2
1
2000
3500
4
9
4
9
4
9
4500
5250
2000
3500
4
9
751.
25.2
75.1
5.1
75.1
2000
3500
100
20
75.1
4
75.12
4
2
4
2
030625.0
0625.3
2000
800
= 5000
40000
093.4941
2000
6000
433.1267
5
5 Daherty Neil. A., --------- management A Finantial expositon, U. S.
A. Mc Graw-Hill Inc. ------
2000
80000
253.9726
6
(
6 R.E. Beard et al Risk Theory: The stochastic Basis of ins., (2nd
edition: U.K., Chapman and Hall, 1978), p. 1
10000
22
The normal approximation
The chebyshev method
The Allen-Duval method
The norm al power method
The student T distribution
Edgeworth series
Simulation
7Shiang lau-Hon
Thomas A. Aiuppa
22 2
7 Hon-shiang law, An effective approach for estimating the aggregate loss
of an ins. Portfolio, Journal of Risk and ins. Vol., 3, 1984, pp. 20-25
2
2
2
2
222
2
2
90000
144000000
450000
12000
2
400
640000
400
800
2000
640000
2000
800
1
225
15
2
15
4.0
10000
22
576000
038.116715
7200000
038.116715
2
2
2
2
2
10000
2
222
22
576000
038.116715
11520000
038.161
11520000
038.161
2
2
2
2
222
4000
253.9726
80000
253.9726
50000
253.9726
1
144
43162.
12
4316.2
12
1216.0
12
1945.0
Automatic Sprinklers
Insurance
AgentBroker
Underweriter
Loss Adjuster
Risk Management Objectives
Risk Reduction
Ridsk avoidance
Loss Control
Risk Separation
Risk Financing Tools
Risk Retention
Risk Combination
Risk Transfer
Risk Avodance
Loss Control
Both Loss-Prevention and loss-
reduction Programs
Fire-Resistive Constructive
Product Liability
Safety goggles
Loss Minimization Programs
Salvage Programs
Heinrich
Heinrich
Frederick Taylor
Safety equals efficiency
Dr. Haddon
Unions
Determining Economic Feasibillity
Cost of accidents
Bird and Germain
Cost of loss control measures
Sprinklers
Extinguishers
Guards
Insurance
PremiumsLoss Frequencies
Loss Seuerity
Risk Separation
Risk retention
Unplanned risk retention
Contingency Reserve
Self Insurance
Risk Combination
General Average
Business Interruption
Risk Transfer
1 2
1
1
+
1 2
1 085.0
1
+
1000
892.143884
2
1
Lease Contract
Leasee
Leasor
Construction Contract
Bailment Contract
Bailor
Bailee
Laundry
Forming Organization Contract
8
8
Linear Programming
Games TheoryQueueing TheoryLoss
Matrix MethodMarginal analysisThe
Worry MethodCritical Probability Method
Break-Even Probability Method
Expected Tangible Loss MethodThe
Expected Utility Apporach
The Loss Matrix Method
Pay-off Matrix
9
9 Williams and Hiens, Risk management ins.6 th edition, Mc Graw-Hill
Inc., 1989, PP. 270279
Minimax criteria
Minimin criter ia
Minimize the Loss Associated with the Most Probable Outcomes
Miniminze the Expected Tangible Loss During the Policy Period
Criteria
The worry method
The Worry Method
Flactuations
The Critical Probability method
0
Even Probability-Break
Michael Smith
150
25
25
150
25
150
Expected Utiltiy Function Method
Risk Averter
Neutral toward risk
Risk seeker
0.0010 25
15 0.0020) - (0.0010 +
25
15
1. Emmett J. Vaughan, Risk Management, John Wiley & Sons Inc., Iowa, 2003.
2. Erik Banks, Alternative Risk Transfer: Integrated Risk Management through Insurance, Reinsurance, and the Capital Markets , 1st
edition, Wiley,Texas , 2004)
3. George E. Rejda, Introduction to Risk Management & Insurance, th ed, Addison Wesley, NY, 2008.
4. Harrington Niehaus, Risk Management & Insurance,1st ed, Irwin/McGraw-Hill, NY, 1999.
5. Doherty Neil A., Corporate Risk Management: A financial exposition, New Jersey., Mc Grew Hill Inc., 1985
6. Green Mark et al., Risk and Ins., 8th edition, N Y, south western Publishing company, 1992
7. Travis Pritchett et al. Risk Management & Insurance 7th edition
Wet Publishing Company Los Angeles 2000
8. S. Travis Pritchett et al., Risk Management & Insurance, 7th edition, Los Angeles, Wet Publishing Company, 2000
9. Williams and Hiens, Risk management and Insurance, 8th edition, California, Mc Grew-Hill inc., 2001