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Risk retention involves an organization accepting the responsibility to handle the financial consequences of a risk rather than transferring it to an insurer. It is a key strategy in risk management that is often used when the cost of insuring against the risk is greater than the risk's potential impact or when the risk is considered uninsurable.
Risk management involves identifying, assessing, and prioritizing risks followed by coordinated efforts to minimize, monitor, and control the probability or impact of unfortunate events. It is essential for ensuring that an organization can achieve its objectives while safeguarding its assets and reputation against potential threats.
Self-insurance is a risk management strategy where a company sets aside its own funds to cover potential losses instead of purchasing insurance from a third party. This approach can offer greater flexibility and cost savings, but requires careful financial planning to ensure sufficient reserves are available for unexpected claims.
Risk assessment is a systematic process of evaluating potential risks that could negatively impact an organization's ability to conduct business. It involves identifying, analyzing, and prioritizing risks to mitigate their impact through strategic planning and decision-making.
Cost-benefit analysis is a systematic approach to evaluating the economic pros and cons of different choices, aiming to determine the best course of action by comparing the total expected costs against the total expected benefits. It is widely used in public policy, business decision-making, and project management to ensure resources are allocated efficiently and effectively.
Concept
Insurance is a financial arrangement that provides protection against potential future losses or damages by transferring risk from an individual or entity to an insurer, in exchange for a premium. It plays a crucial role in risk management, offering peace of mind and financial stability by covering various aspects of life, health, property, and business operations.
Financial reserves are crucial assets that provide a buffer to ensure stability and sustainability for organizations or governments during unforeseen economic disruptions. They help in managing liquidity, mitigating risks, and ensuring operational continuity without relying on additional borrowing.
Recourse factoring is a financial arrangement where a company sells its accounts receivable to a factor but retains the risk if the customer defaults on payment. This means that if the customer's debt proves uncollectible, the company is obligated to buy back the receivable from the factor or replace it with another, potentially more collectable one.
An attachment point is the threshold value in insurance and reInsurance Contracts at which coverage begins to apply. It is critical in risk management, determining the financial responsibility of insurers or reinsurers before a claim is paid out.
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