Hope University College

ACCOUNTING AND FINANCE

RISK MANAGEMENT AND INSURANCE

OBJECTIVES OF RISK MANAGEMENT

Group assignment
Group member ID NO

1. AMANUEL ALENE……………………….109/21

2. MESKEREM ASSEFA…………………….186/21

3.SEBELEWENGEL TAYE……………………482/21

4.YABKAL ABERA……………………………1012/21

5.FRAOL KABETA……………………………..

6.HABTAMU BEKELE…………………………103259

7.DANIEL ASHAGRE……………………………-

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Content
Introduction……………………………………………………………………………………………………………2

Objective of risk management…………………………………………………………………………………3

Pre loss objective…………………………………………………………………………………………………….3

Post loss objective……………………………………………………………………………………………………4

Limitation of risk management……………………………………………………………………………………4

Conclusion…………………………………………………………………………………………………………………..5

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Introduction

We know that risk can be managed through the process of identifying, measuring, and handling
losses associated with property, liability and persons. A successful risk management program
helps an organization consider the full range of risks it faces. Risk management also examines
the relationship between risks and impact they could have on an organization. Risk management
appears in scientific and management literature since the 1920’s.risk management can assist the
managers in mitigating risk factors each company have internal control components which leads
to different outcomes. In this chapter we will see the objectives of risk managing and their
classification with brief explanation.

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Objectives of risk management
The objective of risk management is to identify risk at an early stage and take the necessary steps
or measures to minimize its harmful effects. These objectives can be classified as either pre loss
objectives or post loss objectives.

Pre loss objectives

 Is an objective that a business should prevent before any damage or loss occur.
 It is a measurement that is taken before any kind of loss occurs.
 Goals that a business should strive before any loss occur. The most important and
known methods before a loss occurs are:
1. Economy
2 .Reduction of anxiety and
3. Meeting legal obligation

Economy

Which means the firm should prepare for possible losses in the most economical way.This
involves an analysis of cost of insurance premiums and the cost associated with different
techniques for handling losses.

Reduction of anxiety:

Some losses make greater worries for the risk manager and key executives. Reduce the
possibilities of risk and worries. For example, the threat of a catastrophic losses, such as major
lawsuits.

Meet any legal obligation:

The next objective is to meet legal obligation. For example the government regulation may
require a firm to install safety devices to protect workers from harm.

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 Post loss objectives
Refers to managing after a loss occur. Post-loss objectives will depend on the magnitude of loss,
but generally include to ensure the :

Survival of the firm

Some losses are so extreme that destroys the existence of the organization. Survive means ability
to leave or rebuild.

Continuation in operation

After loss occur it is important to continue operations for survival.

Stability of earnings

Some losses directly affect the earning of an organization, so management technique helps us to
save our company by stabling the earned income.

Continue growth of the company

Risk management helps us to grow by developing new products.

Limitation of risk management

1. Complex calculation

Without any automatic tool each and every calculation regarding risk becomes difficult.

2. Undamaged losses

Losses can be control to the some extent, beyond that level losses cannot be controlled and
managed.

3. Depends on external entities

For managing the risk we require information getting the information about the loss(risk).

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4 Difficulty in implementing

Risk management implementation requires long tie to gather information regarding the risk plan
and strategies.

5 Potential threats

Means possible threats which may occur or may not occur.

6. Performance

Risk management tools and techniques is understand by only qualified professionals. It is very
difficult to understand by common man.

Conclusion
To conclude this lesson we can say that risk management is basic and important for any firm or
organization even managers to control and lead so to become successful we have to follow this
methods for our organization to survive.

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