tailieunhanh - Lecture Risk management and insurance - Lecture No 7: Advanced topics in risk management

In this chapter, the learning objectives are: The changing scope of risk management, enterprise risk management, insurance market dynamics, loss forecasting, financial analysis in risk management decision making, other risk management tools. | Advanced Topics in Risk Management Lecture No. 7 1 Objectives The Changing Scope of Risk Management Enterprise Risk Management Insurance Market Dynamics Loss Forecasting Financial Analysis in Risk Management Decision Making Other Risk Management Tools 2 The Changing Scope of Risk Management Today, the risk manager’s job: Involves more than simply purchasing insurance Is not limited in scope to pure risks The risk manager may be using: Financial risk management Enterprise risk management 3 The Changing Scope of Risk Management Financial Risk Management refers to the identification, analysis, and treatment of speculative financial risks: Commodity price risk is the risk of losing money if the price of a commodity changes Interest rate risk is the risk of loss caused by adverse interest rate movements Currency exchange rate risk is the risk of loss of value caused by changes in the rate at which one nation's currency may be converted to another nation’s currency Financial risks can be . | Advanced Topics in Risk Management Lecture No. 7 1 Objectives The Changing Scope of Risk Management Enterprise Risk Management Insurance Market Dynamics Loss Forecasting Financial Analysis in Risk Management Decision Making Other Risk Management Tools 2 The Changing Scope of Risk Management Today, the risk manager’s job: Involves more than simply purchasing insurance Is not limited in scope to pure risks The risk manager may be using: Financial risk management Enterprise risk management 3 The Changing Scope of Risk Management Financial Risk Management refers to the identification, analysis, and treatment of speculative financial risks: Commodity price risk is the risk of losing money if the price of a commodity changes Interest rate risk is the risk of loss caused by adverse interest rate movements Currency exchange rate risk is the risk of loss of value caused by changes in the rate at which one nation's currency may be converted to another nation’s currency Financial risks can be managed with capital market instruments 4 Transparency Master Exhibit Managing Financial Risk—Two Examples 5 Exhibit Managing Financial Risk—Two Examples 6 The Changing Scope of Risk Management An integrated risk management program is a risk treatment technique that combines coverage for pure and speculative risks in the same contract A double-trigger option is a provision that provides for payment only if two specified losses occur Some organizations have created a Chief Risk Officer (CRO) position The chief risk officer is responsible for the treatment of pure and speculative risks faced by the organization 7 Enterprise Risk Management Enterprise Risk Management (ERM) is a comprehensive risk management program that addresses the organization’s pure, speculative, strategic, and operational risks Strategic risk refers to uncertainty regarding an organization’s goals and objectives Operational risks are risks that develop out of business operations, such as product .