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one of the definitions of insurance as a risk management techniques, is to take the firm in question to the place prior to the accident.
Thus, this implies, that the amount affected by the risk would include financial loss, and cost to replace.
If you have additional information please share.
The Risk could Impact four main categories: People, Assets, Environment and company Reputation. The experience in risk assessment and risk management is a key in how we measure it's impact. We need to identify the risk, we need to see how often this kind of risk releases( Likelihood) in the industry, which can be obtained by searching similar cases in similar industries. we also need to know how much money would be lost for each category if this risk is released(Severity). After this, we build a Risk Assessment Matrix or RAM( Severity Vs. Likelihood) which gives a quick guidance, how this risk would impact my business if released.
The impact is very much depending on the risk and I prefer scenario analysis as the tool to access it. So the general question is: What will happen when the risk becomes reality and what is the cost for each item. This can lead to quite long chains of dependencies.
Thus, market risk is rather simple: You may face buying at a higher or selling at a lower price than expected. Credit risk is more complex. As a seller, you have delivered but don't get paid (quite straightforward to calcute). As a buyer or seller before delivery, you still have the risk of your counterpart not fullfilling the contract forcing you to make a new deal with worse conditions. Thus, within credit risk there is a market risk. Operational risk is very much depending on the individual risk and needs to be individually calculated. E.g. a technical problem in a project: You may have to use another technology which is more expensive (cost). You suffer from a delay and to catch up, you speed up working, which your contractors may accept at a surcharge (cost). Still, finalizing your project later usually means earning money later (loss of revenue). You may even estimate that the loss of reputation may result in a loss of customers (loss of revenue). So it really depends on the scenario. I recommend to think widely and not forget any of the consequences as they may pile up.
Regarding insurance, it is very much the question of your contract. Be carefull of what it does include. Often, the direct cost (e.g. replace a broken something) is covered, while the more indirect parts are often not insured (and insurable).
Risk impact can be analyzed using risk assessment matrix . Criteria for the risk assessment will be Risk =Severity * Likelihood . Any matrix can be used from 4*4 or 3*3 or 5*5 matrix. Its depends on the risk assessor to choose the criteria for risk assessment.
The insurance principle INDEMNITY is indicates to the facts you present in words " insurance indemnify the insured by returning him to the financial position where he was immediately before the loss no more no less " . The limit of indemnity or compensation is usually determined at the insurance policy inception in term of the policy total sum insured to which the insurer is liable and obliges to pay upon loss occurrence , that mean the sum insured is comprises the financial and replacement cos together.
However risk impact may extended to include the consequential loss which is an indirect loss following the direct loss , if so another sum insured appears to represent the limit of indemnity that the insurer will pay any claims arises accordingly , and assuming that the insured has initially asked to cover such risks and pay the correspondence premium.
Best wishes.
the most commonly adopted risk measuring technique is its Occurrence and Severity.
If the occurrence of an event is quite frequent and the severity or impact is low then you may need to consult the Risk Owner on either its acceptance or mitigation.
if the occurrence is not frequent at the same time carry huge impact then it is necessary to have required controls in place which can reduce the impact of the risk to an acceptable level.
During this exercise it is really important to monitor the activities around control implementation.
After identifying the risk events and their relationships, assess the probability of occurrence and its consequences. The probability can be scaled based on likelihood e.g. 1-very unlikely, 2-unlikely, 3-likely, 4-very likely. Consequences may include cost, schedule, performance impact, as well as capability or functionality impacts. An example would be to scale it based on amount of financial loss Low - <1,000, Moderate - 1,000-10,000, High - 10,000 - 50,000, Severe - >50,000. From this you can use the formula for level of risk (level of risk=Likelihood x consequence) and have a rating of which risks to prioritize and needs immediate action.
The conditions to be provided in danger in order to be capable of being secured against himThere are a range of qualities and conditions must be available in a given insurance risk so that we can against him, and even insurance companies accept that risk, and these conditions or traits remember the following:1. Probability. Any be a danger potential of falling "not confirming nor impossible" because the possibility, "uncertainty" is a key element in the concept of insurable risk, intended this probability not inevitability of this danger it may may not be achieved, Vhadt car or house fire accident, factory or the whole incident of theft possible accidents falling but it is not inevitable falling, while the risk of death, for example, an inevitable fall "is certain to happen." but the element to make sure here in terms of the timing of death. If the danger is certain to fall the insurance companies will not insure against this risk, either if the threat is impossible to fall, the individual will not believe the threat will not be located and shall bear the costs is indispensable to pay, for example, it may not be insurance on goods shipped by sea against the dangers of the voyage after the goods have arrived safely and he knows one or both parties to the contract so because the likelihood of sinking became an improbable here is linked to the condition probabilistic provided another is said to be a future danger to happen, which we will refer to it later on.2.on be the subject of risk insurance measurable in quantitative Measurability. Since insurance is based on the compensation for losses resulting from the achievement of the insured against the risk it makes sense that these losses are measurable and can be expressed quantitatively even easier for the insurance company premium account to be met by student insurance. For example, at the time of the collision of a car accident, the insurance company to compensate for the damage to the physical quantifiable, such as treatment costs, and repair the damage by car, or repair the property of others damaged by the incident, to pay instead of damage or holidays which resulted The psychological damages such as pain and suffering and fear, it does not matter to compensate for it is not subject to the principle of measurement and evaluation.3.on be a loss resulting from the occurrence of the risk insured against accidental and unintended meaning that the risk is involuntarily purely Unintentional that is, the danger is mortgagee to one end of the insurance contract, but depends on the will of an independent third party or conditions with no income for the parties to the contract which does not have her, so Van insurance companies accused of doing to compensate the person who deliberately harm the thing insured deliberately because this deliberate act is not an event occurred at random as to deliberately damage was caused violates the law of large numbers, which supports basic and more on the events that are happening at random and is known as the insurance company is very dependent in their accounts on this law.4.an be a danger subject of insurance law Leyality project in the sense that the risk is the subject of insurance law project and to be a moral example, insurance on the stolen goods or contraband not worth compensation when you check the danger, and the insurance companies accused of doing insurance against traffic violations, for example, because the violation is unlawful and unethical and the damage caused as a result of a traffic accident turned out to be a driver under the influence of drugs or sugar does not deserve compensation.5.on not be a loss in the event of occurrence of the sheer volume. Do not fall in the sense that the loss of a large number of people at the same time because the insurance companies can not afford such massive losses, insurance companies could avoid the loss of the sheer volume through the use of reinsurance, or at its geographical diversification.6.an be a premium that is selected for a particular risk to manageable paid by the insured to H.fmthela can insurance companies that insure the life of a person 99 years old, but it will cost that person's insurance premium is high because the likelihood of death occurring at this age is too high, thus, this person is not life insurance.7.ajb be a risk insured against future: the sense that the loss should be subject to the element of chance, which means that potential and uncertain falling loss because the loss that occurred with the past or the danger that happened in the past is certain to fall and the possibility of occurrence of 100% may not be insurance against uncertain falling risk for example, the normal consumption of the machine is certain to fall may not be conscious insurance.
It would very much depend on the type of risk we are measuring. In many cases risks may not be easily quantifiable and thus will be difficult to insure. In this case it is likely a company would choose to manage the risk in another way. I.e. it may conduct a risk quantification exercise based on its past experience of similar events or using data from the local markets to understand the frequency/severity distributions of a specific risks. In many cases the risks which may have seemed significant at the first stages of Risk Assessment will turn out to be easily managed by incorporating specific operational procedures into the daily operation of a company.
Measuring impact of a risk and it's likelihood is a complex field and only a small fraction of relatively simple risks are, in fact, insurable.
Other risk management techniques, such as Alternative Risk Transfer, risk mitigation strategies, hedging, avoidance of certain risks and other methods can all be employed in Managing Risks. Which methods are chosen are based on the Company's specific strategy, risk tolerance and the Board's risk appetite. All of these need to be defined in detail before the correct risk management methods can be applied.
If you have questions about specific methods of measuring insurable risks, please feel free to expand the question.
Hope this helps,
Anna
Risk: Risk is the combination of the hazardous event occurring and the consequence of the event.
Risk = Likelihood X Consequence
Where Likelihood is the chance that the hazardous event will occur and Consequence is the outcome of the Hazardous event.
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