RISK MANAGEMENT — STRIKING THE BALANCE

Abstract

The conduct of industry operations involves, inevitably, risk to a corporation's assets, earnings and people. Additionally, there will always be liability risk. The management of these risks is an essential requirement for proper management of a corporation in general. Risk management does not merely involve buying insurance. It requires that there be careful identification and evaluation of risk followed by determination of how that risk might be controlled, financed or transferred. The control of a risk may include elimination, containment or training. Financing a risk might be achieved out of some special fund, operating revenue, borrowings or perhaps even by the use of a captive insurer or a combination of all of these. Risk transfer can be effected by contract, by exercise of legal rights or by the purchase of insurance.

There is a wide range of insurance options designed to provide a measure of protection and management of asset risk, earnings risk, people risk and liability risk. The key, in the end, is striking the balance between the extremes of unacceptable risk on the one hand and not doing business at all on the other.