Risk implies doubt about the outcome in a given situation. But the outcome is with Risk is negative, a loss might occur. Chance also implies doubt about the outcome in a given situation but the difference is the outcome is normally a favourable to us.

Eg: Risk-Losing a job, accident while drive

Chance-Winning a bet, passing an exam

Uncertainty implies dobut about the future. It is based on a lack of knowledge. The basis of risk is lack of knowledge. If we always knew what was going to happen there would be no risk. We operate in an uncertain or risky environment. 

A Peril is an event that will give rise to a loss.

Eg: Flood, theft, fire, storm, accident and vandalism are all Perils.

Hazard is a factor which may influence the outcome of a loss. Hazards are not the cause of the loss, but they can increase the likelihood of a Peril operating.

Ex: Wet floor, flammable debris piled near the furnace in the bassement will provide ready fuel should a spark escape, poorly maintained heating and air conditioning systems, use of damaged extension cord and overfusing are hazardous conditions and are more likely to result in the fire.

Personal risks are based on the loss of life or loss of income arising from premature death, physical disability, old age or unemployment.

Ex: If you become injured or ill and could not work for an extended period of time or even again how would you survive?

If a perspon die prematurely as a result of an accident how would one's family survive.

These Risks arise from property we own.

Ex: Clothes, car, electronic items

Obligation to other people.

Ex: If we inadvertently cause injury to others or damage to their property we can be held responsible. If we own or occupy a premise we are responsible to keep them safe.

Ex: If our children or pets cause damage to someones property we could be held responsible.

Risk of a peril damaging business property.

Ex: Businesses are subject to many perils. Property damaged must be restored or repaired, which could be financially devastating. Risk of not paying bills.

If an incident causes a business interruption, we lose income, bills will not be paid. Things like heat, water, electricity, mortgage and taxes still need to be paid even the business is not operating.

Risk of occupancy of premises.

Ex: If a customer experiences personal injury a the business site, it could prove costly if he or she decides to sue. Risk of products manufactured.

Ex: If products cause personal injury to customers, it could prove costly to the business. Risk of employee injury.

Ex: Employees could be hurt while operating on the job .

Speculative risk exists where there is either a chance of loss or a chance of profit. There are two possible outcomes: gain or loss. Such risks are not insurable.

Ex: A wager on a throw of dice or any other form of gambling could have a good or bad outcome.

Pure risk entails the chance or loss but no chance of profit. There are two possible outcomes, we may suffer a loss or there is no chance in our existing condition.

Ex: If we leave our car unlocked we may return to find the same as we left or we may not. There is no posibility of making profit.

Personal risks for businesses arise out of being unable to manage the business.

Ex: Loss of life or injuty to a business owner will prevernt them from overseeing their business. Also the risk of not being able to fulfill the role as a business shareholder.

Ex: Loss causing death, disability, or sickness to one of the shareholders can leave them unable to contribute in their role. The other shareholders will be forced to continue without them and the business will suffer.

Personal Risks - Loss of life, loss of income arising from premature death, disability, old age or unemployment

Property Risks - Theft, flood, storm, accident, injury to public, damage to others' property

Liability Risks - This is due to obligation to others

Ex: If we inadvertently cause injury to others or damange others' property, we can be held responsible.

We are responsible to keep our premises safe.

If our children cause damage to others property, we can be held responsible for the same.

If our perts or animals we own cause injury or property damage, we could called upon to compensate for the loss.

Personal Risks - If the owner is unable to attend the business, he may face loss due to business interruption.

Property Risks - Large part of the wealth is in the form of some kind of property. Building, equipment, bridges, mines etc. These perils directly affect property: a fire destroys a building, a hailstorm wipes out the wheat crop, a theif steals our stock, lightning strikes a power transformer.

Liability Risks - This risk is due to obligation to employees, customers etc. Ex: Customer may fall in our premises due to wetness. Defective materials supplied by us

1) Identifying the Risk

Direct damage to the property

Business interruption

Liability

Employer's Liability

Fidelity

2) Measuring the Risk

Loss frequency

Loss severity

3) Controlling the Risk

One the risks have been identified and measured, manager has to find out ways to Controll the risk.

a) Reduce the Risk by Preventive Effort

b) Assume or Retain the Risk

c) Transfer the Risk

1) Insurance is the method of sharing the losses of the few individuals in a group who suffers them among the many members of that group who do not.

2) Insurance is the undertaking by one person to indemnify another person against loss or liability for loss in respect of a certan risk or peril to which the object of the insurance many be exposed, or to pay a sum of money or other thing of value upon the happening of certain event.

3) Insurnace is achieved when a large group of individuals make contributions to a fund in order to have sufficient means to reimburse those members of the group who suffer misfutune as a result of a specified future happening.

4) Insurnace - indemnifies the loss, security, peace of mind

1) Payment of the losses suffered by those who have claims

2) Reserves for losses that have occurred but have not been reported yet(Outstanding losses)

3) Reserves for returns of partial premiums to those who cancel a policy part way through its term

4) Cost of managing the pot