Buổi 1: 5/1/2022

Risk management and insurance

Chapter 1: Risk and its treatment

Case study: Titanic

- Traditional definition of Risk: Uncertainty concerning the occurrence of a loss
- Loss exposure: Tổn thất tiềm ẩn có thể xảy ra
- Objective risk: relative variation of actual loss from expected loss
- Subjective (perceived) risk
- Chance of loss: the probability that an event will occur
- Objective probability
- Subjective probability
- Peril and Hazard
+ Peril: the cause of loss: Hiểm họa
+ Hazard: condition that increases the chance of loss: Mối nguy, nguy cơ
❖ Physical hazard
❖ Moral hazard: liên quan đến cá nhân, tổ chức
❖ Attitudinal hazard (moral hazard)
❖ Legal hazard
- Pure risk and Speculative risk:
+ Pure risk: Rủi ro thuần túy
+ Speculative risk: Rủi ro đầu cơ
- Diversifiable risk and Nondiversifiable risk:
+ Diversifiable risk: Rủi ro đa dạng hóa được
+ Nondiversifiable risk: also called fundamental risk: Không đa dạng hóa được
+ Government assistance may be necessary to ensure non-diversifiable risks.
- Enterprise risk: encompasses all major risks faced by a business firm: Rủi ro doanh
nghiệp
+ Strategic risk: rủi ro chiến lược
+ Operational risk: rủi ro liên quan đến quá trình hoạt động của công ty
+ Financial risk: rủi ro về tài chính
- Enterprise risk management
- Systemic risk: Rủi ro hệ thống
- Personal risk: rủi ro cá nhân: directly affect an individual or family.
+ Property risks
 + Direct loss vs. indirect loss (consequential loss)
+ Liability risks: Rủi ro liên quan đến trách nhiệm, dân sự.
- Commercial risks: Rủi ro thương mại
+ Property risk:
+ Liability risk
+ Loss of business income
+ Cybersecurity
+ Human resources exposures
+ Foreign loss exposures
+ Intangible property exposures
+ Government exposures
- Burden of risk on society: Gánh nặng của rủi ro đối với xã hội
- Techniques for managing risk
+ Risk control:
❖ Avoidance
❖ Loss prevention
+ Loss reduction:
❖ Duplication: Nhân bản
❖ Separation: Tách biệt
❖ Diversification: Đa dạng hóa
+ Risk financing:
❖ Retention
❖ Active retention
❖ Passive retention
+ Self insurance: Noninsurance transfer (bảo hiểm không chuyển giao được)
+ Insurance: the most practical method for handling major risks
+ Pooling technique
+ Law of large numbers

Chapter 2: Insurance and risk

- Insurance: the pooling of fortuitous losses
- Basic characteristic of insurance
+ Payment of fortuitous losses
+ Risk transfer
+ Indemnification
- Ideally insurable risk:
+ Large number of exposure units: Dựa trên quy tắc số đông
 + Accidental and unintentional loss: Rủi ro mang tính tai nạn, không phải cố
tình
+ Determinable and measurable loss: Đo lường được đo đếm được
+ No catastrophic loss: rủi ro quá khủng khiếp, như là thảm họa, lũ lụt,...
+ Calculable chance of loss:
+ Economically feasible premium: Giá bảo hiểm phải chấp nhận được
- Adverse selection (Lựa chọn đối nghịch) and insurance:
+ Adverse selection: is the tendency of persons with a higher-than-average
chance of loss to seek insurance at standard rates.
+ Can be controlled by: careful underwriting, policy provisions
- Insurance vs. Gambling
- Insurance vs. Hedging
- Private insurance (Bảo hiểm tư nhân)
+ Life and Health
+ Property and liability
+ Grouped into 2 major categories: Personal lines, commercial line
- Government insurance:
+ Social insurance programs
+ Other gov insurance programs: Found at both federal and state-level
- Benefits:
+ Indemnification for loss
+ Reduction of worry and fear
+ Source of investment funds
+ Loss prevention
+ Enhancement of credit
- Social costs:
+ Cost of doing business: expense loading
+ Fraudulent claims
+ Inflated claims
HW: Case application chapter 1 and 2

Buổi 2: 7/1/2022
Chapter 3: Introduction to risk management
Meaning of risk management:
- A process that identifies loss exposures faced by organizations and selects the most
appropriate techniques for treating such exposures.
- Loss exposure
Objectives of risk management
- Has objectives before and after a loss occurs.
- Pre-loss objectives:
+ Prepare for potential losses in the most economical way
+ Reduce anxiety
+ Meet any legal obligations
- Post-loss objectives:
+ Survival of the firm
+ Continue operating
+ Stability of earnings
+ Continued growth of the firm
+ Minimize the effects that a loss will have on other persons and on society.
Risk management process:
- Try to identify potential losses
- Measure and analyze the loss exposures
- Select the appropriate combination of techniques for treating the loss exposures
- Implement and monitor the risk management program
Important loss exposures

Chapter 4: Enterprise risk management and related topics

Enterprise risk management (ERM)

- Financial risk management
+ Commodity price risk
+ Interest rate risk
+ Currency exchange rate
- Strategic risk
- Operational risk
- Advantages
- Barriers to a successful ERM
The ERM process vs. the traditional risk management process
Emerging risks: Cyber liability
Capital market risk: Financing alternatives
Loss Forecasting
- Phân tích xác suất (probality analysis)
- Regression analysis (dựa trên hồi quy): xem xét các mô hình đơn biến và đa biến,
tìm hiểu các nguyên nhân yếu tố tác động nhiều nhất
- Based on phân phối tổn thất, phân phối xác suất (loss distribution)

Buổi 3: 10/1/2022

Chapter 5: Types of insurers and Marketing systems