Risk Management

In today’s corporate world, every business encounters some form of risk, from the predictable to the unpredictable. Consequently, in order for businesses to achieve success, leadership must utilize methods targeted at controlling and managing risk. As Bannister (2004) states in the article, The Ubiquitous Role of Risk Management in the Modern Economy, “Risk management is a logical response to the vulnerabilities and complexities of today’s modern world…and insurance is as good as any other as it provides the oldest formal approach to the management of risk.” Moreover, insurance represents a valuable risk-financing tool. Few organizations have the reserves or resources necessary to take on the risk themselves and recompense the total costs following a loss. Purchasing insurance, however, is not risk management. A thorough and thoughtful risk management plan is the commitment to prevent harm. Risk management addresses many of the risks not insurable, including brand integrity, potential loss of tax-exempt status for volunteer groups, public goodwill and continuing donor support. According to Williams and Heins (1989) in the book Risk Management and Insurance, “the risk management process typically includes six steps, which include, determining the objectives of the organization, identifying exposures to loss, measuring those same exposures, selecting alternatives, implementing a solution, and monitoring the results.”

The term risk management represents a relatively recent evolution of the term "insurance management." The concept of risk management encompasses a much broader scope of activities and responsibilities than insurance management. Risk management is now a widely accepted description of a discipline within most large organizations. Basic risks such as fire, windstorm, employee injuries, and automobile accidents, as well as sophisticated exposures such as product liability, environmental impairment, and employment practices, are the result of the...