Shared Flashcard Set

Details

Practice of Risk Management
2015 online course
122
Insurance
Professional
01/12/2015

Additional Insurance Flashcards

 


 

Cards

Term
Discuss the definitions of risk and the six general classes of risk. (pg. 2) 4 pts
Definition

For purposes of the CRM program, the most useful definition of risk is: "Uncertainty that may be either positive or negative arising out of a given set of circumstances. "

 

General Classes of Risk

1. Economlc -financial marketplace risks

2. Legal - compliance with statutory liability

3. Political - changes in law political environment

4. Social -public relations, reputation, cultural issues

5. Physical - property, people, or information

6. Juridical - jury or judge's decision or jury attitude

Term
Discuss the definition of risk management and the five steps of the risk management process. (pg. 5) 4 pts
Definition

Definition of risk management :"The process of managing uncertainty of exposures that affect an organization's assets and financial statements using five steps: identification, analysis, control, financing, and administration."

 

Five Steps of the Risk Management Process

1. Risk Identification-The process of identifying and examining exposures of an organization

2. Risk Analysis-The assessment of the potential I impact of various exposures on an organization

3. Risk Control-Any conscious action or inaction to minimize at the optimal cost the probability, frequency, severity, or unpredictability of loss

4. Risk Financing-The acquisition of internal and external funds to pay losses at the most favorable cost

5. Risk Administration-

a.Implementation - Implementing the desired actions and risk management plan

b.Monitoring Examining and evaluating the results of risk management actions and plans

 

Term
Discuss how risk administration supports the risk management program. (pg. 16) 4 pts
Definition

 How Risk Administration Supports the Risk Management Program:

1. Identifying skills, attributes, and traits required of a risk manager

2. Developing internal and external members of a risk management team

3. Using infonnation technology for communication, allocations, loss control, and loss development to properly identify and manage risks

4. Developing and implementing risk managemel policies and procedures

5. Addressing internal and external consulting issues

6. Addressing ethics in risk management

7. Addressing how risk management can be effective · within the organizational culture.

Term
Discuss the demands and skill sets required of an effective risk manager. (p. 3) 6 pt
Definition

Demands and Skill Sets of an Effective Risk Manager:

1. Technical: Identification of exposures using various methods ; Analysis of losses and exposures;

· Selection and implementation of appropriate safety and loss control programs using cost-benefit analysis; Claims and lltigation management; Selection and management of agent/broker/insurer partners and other service providers; Arrangement of risk financing through retention, transfer, and insurance; Review and negotiation of contracts; Evaluation, interpretation and cost-effective purchasing of insurance coverages;  Development and leadership of crisis management and business continuity programs; Analyze results of accident investigations ; Participation in due diligence analysis; coordination of compliance programs

2. Managerial: planning, organizing, leading, controlling

Skill sets required: personal attributes, professional and technical skills, managerial skills and experience

Term
Discuss the value an effective risk manager adds to an organization. (p.8) 6 pts
Definition

Values added by an effective risk manager:

Elevates the importance and support of risk management

Supports managerial decisions to achieve reduction of the TCOR.

.. Improves morale and productivity among the work force

Improves quality, processes, and technology

Direct tie-in between benefits and risk management issues

Timely, accurate, and comprehensive data and reports fromusing an effective and integrated RMIS

Increases profitability (reduced costs or increased revenue)

Protects the organization's reputation and brand

Term
Discuss the purpose, characteristics and content of the risk management mission statement. (p. 10) 6 pts
Definition

Risk Management Mission Statement

Purpose - states the purpose and overall goal of the risk management program and guides the actions and decisionmaking of the risk manager

Characteristics Relatively short, clear, and concise Should be aligned with the organization's mission statement · Used with all activities related to risk management

Content - includes the priorities of the risk management program

 

Term
Discuss the purpose, characteristics and content of the risk management policy statement.(p. 10) 6 pts
Definition

Risk Management Policy Statement

Purposes Defines the policy for managing risks and the relevance to the organization's strategic plan, goals, and objectives Clarifies risk management goals and direction Outlines the fundamental guidelines of the risk management function

Focuses on fundamentals and addresses ideas that may not otherwise be presented to the organization

Forces senior management to actively consider an organization's risk tolerance to increase the value of the risk management program

Clearly specifies responsibility and authority, opens up lines of communication, and minimizes duplication of efforts

Characteristic - should be one to two pages in length

Content Refers to the risk management mission statement Addresses various areas of risk management · Incorporates the risk management philosophy and ethical considerations

Term
Discuss the purpose, characteristics and content of the risk management standard operating procedures manual. (p. 10) 6 pts
Definition

Risk Management Standard Operating Procedures Manual (also known as the Risk Management Policy and Procedures Manual)

purposes- Reaffirms and communicates senior management support for the risk management program to all employees with a brief statement Defines scope, responsibilities and authority manager and others associated with the risk management program.  Establishes expected levels of performance and cooperation. Familiarizes personnel with procedures to effectively manage risks and exposures. Provides a convenient reference or "how to" guide

 

Characteristic - a lengthy document that can be from several pages to several hundred pages

 

Content- Letter of support from chainnaniCEO/president Risk management mission and policy statements · Risk management department functions · Ethical and regulatory considerations Risk financing program . Procedures · Crisis management and business contInuIty plan

Term
Discuss the purpose and content of a risk management stewardship report. (p. 18) 6 pts
Definition

The purpose of a a risk management stewardship report is to provide an overview of risk management programs on a periodic basis to identify successes and opportunities for improvement.

 

A Risk management stewardship report should contain:

charts and graphs

organization's core vales

total cost of risk

benchmarks

loss control program features and results

claims management updates on settlements and reserves

status of open litigation

insurance program summary

projects and initiatives

other key indicators of success and opportunities for improvement

Term
Discuss how to effectively implement and monitor a risk management program. (p. 20). 6 pts
Definition

Implementing a risk management program:

1. Gain support and commitment from senior management  - this is the critical foundation!

2. Communicate risk management frequently with employees throughout the organization as well as with 3rd party providers

3. Continually reinforce the commitment to risk management principals

4. create and have readily available an organization chart or flow chart showing interaction with other departments.

5. Communicate frequently with the risk management team so the team members understand the goals and objectives of the risk managemet function and how it addresses insurance policy provisions, loss control, claims reporting, and the general treatment of risk.

6. Solicit cooperation from all levels of management and as many internal personnel from the organization and external people as possible.

 

Monitoring a risk management program:

Periodically review and update the risk management mission statement, policy statement, and standard operating procedures manual.

Evaluate and report on the effectiveness of the procedures.

The risk management reports and/or stewardship report should provide credibility to the risk management program and reassure management of the protection of the organization's assets and resources.

Term
Discuss the reasons why a risk manager needs a risk management team and the team membership. (p.2) 5 pts
Definition

The risk manager needs a team because:

not every risk management function can be performed alone. information or expertise is needed from others both within the organization and outside the organization.

 

Team members can be the risk manager, safety, HR, finance, dept or operation mngrs, legal, audit, external-agents consultants, RMIS providers, actuaries, etc

Term

· Discuss the purpose and selection methods used by a risk manager for insurance and other service providers.

 (p. 5) 5 pts

Definition

The purpose of insurance and other service providers is to provide expertise, loss control, claims assistanc, training etc at optimal cost.

 

The selection methods for procuring insurance or service providers:

Appointment (AOR or BOR)

Request for proposal (RFP)- invited to propose first come first quoted basis typically

Conceptual bidding- general ideas and concepts then markets are awarded

Term
Discuss the general considerations when using bid specifications, fees and commissions in the selection and payment or service. 5 pts
Definition

General Considerations when using bid specifications:

Identification of the parties and introduction

Description of the project or service

Requirements

Time line

Costs

Legal matters

Post-contract activities

Term
Discuss the importance of effective communication for risk managers and how basic personality types affect the communication process. (p. 16) 5 pts
Definition

Effective communication is important for risk managers becuase the success and survival of the organization may depend on it.  It improves cooperation with both internal and external risk management team members. It also better identifies environmental changes and allows the organization to readily adapt to external influences related to organizational goals, stakeholder expectations, and organizational performance.

 

Basic personality types affect the communication process:

director/driver

relater/amiable

thinker/analytical

socializer/expressive

Term
Explain the steps to effectively communicate risk management information and how "noise" affects communication. (p. 21) 5 pts
Definition

Five Steps of the communication process: 1. creation 2.transmission 3. reception 4. translation 5. response

 

noise affects: anything that distorts a message by interfering with the communication process; it can affect the process at any stage, take many forms, and may not be recognizable.

Term
Discuss how content-based communication differs from context-based communication. (p.28) 5 pts
Definition

content-based communication: detail-driven, fact-based advantages-direct and quick disadvantages-lack of awareness of real issues and needs. little opportunity for feedback to confirm the receiver received and understood the message. receivers may not be aware of larger issues and focus only on specifics content.

example of content-based communication is safety video and procedure manuals

 

 context-based communication: background, setting, framework, advantage- addresses deeper more meaningful issues. disadvantages- takes more time, allows for objections to be raised

example of content-based communication is planning sessions and team meetings

Term
Discuss how a risk manager accesses electronic data and information and the advantages and disadvantages of each. (p. 3) 5 pts
Definition

access data by

stand-alone personal computer

local area network

wide-area network

the internet

cloud computing

Term
Discuss the uses of a Risk Management Information System (RMIS). (p. 13) 5 pts
Definition
RIMS support the user in the risk management process of identification, analysis, financing, control, implementaion and monitoring.
Term
Discuss considerations when purchasing a Risk Management Information System. (p. 16) 5 pts
Definition

Considerations when purchasing a RIMS

short-term and long-term cost benefits

currency of technology

system speed

security

licensing options and cost

alignment of system capabilities with org's goals

turnaround time for data loads

data quality control

flexibility

customer support

pricing

ease of use- export/import

Term
Discuss the steps of the benchmarking process and its advantages and disadvantages. (p. 19) 5 pts
Definition

Steps of the Benchmarking Process:

Identify the area or process to be measured.

Identify organizations with similar areas or processes.

Identify organizations who are leaders.

Survey those leading organizations for measures and practices.

Study those "best practices" organizations to identify leading edge practices.

Implement new and improved processes reflecting those best practices.

 

Advantages of benchmarking

Encourages continuous improvement

Helps prioritize areas in need of improvement

Enhances creativity

 

Disadvantages of benchmarking

 Data must be analyzed and judged; cannot be taken at face value

Data can be easily misinterpreted

Data errors

Comparison problems

 

Term
Discuss the rationale and objectives of a total cost of risk allocation system. 9 pts
Definition

Rationale of a TCOR allocation system- in order to remain competitive, an organization must be able to track and properly provide for ALL types of organizational costs, including the TCOR.

 

Objectives of a TCOR Allocation System

Identify factors contributing to the TCOR

Create accountabilty

Enhance loss control

Support the competitive advantage

Alter behaviors

Term
Discuss the steps involved in the total cost of risk allocation process. (p. 5) 9 pts
Definition

Total Cost of Risk Allocation Process:

Determine the desired goals and objectives.

Determin the costs to allocate.

Select the allocation variables.

Create the allocation model.

Term
Differentiate between and be able to calculate exposure-based and experience-based allocation models. (p. 11) 9 pts
Definition

Exposure based method - each unit is assigned costs on equitable basis, based on the exposures each unit presents. examples: sales, payroll, each vehicle, sq footage

 

Experience-based method the only variable is each unit's loss experience. example - allocations based on # of losses, cost of losses, percentages.

 

Can also be a combo method of allocation

Term
Discuss the purposes and broad areas of due diligence · activities. (p. 2) 8 pts
Definition

Purpose of the due diligence -

to perform an investigation of a business, situation, activity, or person to assist with effective decision-making. 

 

Broad areas of due diligence:

mergers/acquisition

purchase of new assets

development and introduction of a new product or service

undertaking a joint venture or contract

addition of key personnel

Term
Discuss the difference between a merger and an acquisition and the three types of structures involved. (p. 4) 8 pts
Definition

Merger- 2 or more organizations create a new entity and agree to move forward as one and issue the appropriate ownership interests

 

Acquisition- one organization takes over another organization and is established as the new owner with the ownership interests continuing unchanged.

 

Three types of structures

Entity

Asset

Merger

Term
Discuss the team approach to the merger and acquisition due diligence process including the four steps. (p. 7) 8 pts
Definition

Steps of the due diligence process of merger and acquisition

1. Identification- gather info and identify risk

2. Review and analysis- loss runs, insurance coverage review

3. Reporting- existing exposures- qualitative and quantitative- to combine or not

4. Post-transaction- onsite inspections, administrative issues,

 

Term
Discuss the common law duties of directors, officers, and fiduciaries. (p. 2) 6 pts
Definition

Common Law Duties:

Obedience- actions conform to legal standards and requirements.

Loyalty- undivided and unselfish loyalty with no conflict between organizational duty and self-interest

Diligence- competent overisght of the organization in an expedient, knowledgeable manner using the standard of care of a reasonable prudent person in a similar position in similar circumstances

Term
Discuss the definition of Directors and Officers Liability and the five elements of the Business Judgment Rule. (p. 5) 4 pts
Definition

Directors and officers liability is any liability resulting from a director or officer of an organization committing a negligent act or omission, misstatement, or misleading statement.

 

Five elements of the business judgement rule:

(An all or nothing rule)

1. Business decision- action must be taken in making business decisions.  Not taking action is protected if it was conscious decision not to act.

2. Disinterestedness- a decision must be made in an independent and disinterested manner without expecting personal financial benefit unless the decision results in a benefit to the organization and all of its stakeholders.

3. Due care-a decision must be made based on reasonable and relevant information.

4. Good faith- a decision must be made with an honest belief that the decision is in the best interest of the organization, not simply to preserve his or her position or benefits.

5. No abuse of discretion- a director or officer is protected against honest errors in judgement that can be justified by a rationale or that are not egregious on their face.

 

Business decision

Disinterestedness

Due Care

Good Faith

No abuse of discretion

Term
Discuss the risk control techniques used to manage directors and officers exposures. (p. 8) 4 pts
Definition

Risk Control Techniques for Directors and Officers:

Board Composition

Procedural actions by board members

Delegation by board members

Avoidance of conflicts of interest

Term
Discuss the definition of fiduciary liability and fiduciary exposures. (p. I5) 4 pts
Definition

Fiduciary liablity is liability imposed upon any person who exercises any discretionary authority or control with respect to the management or administration of an employee benefit plan or its assets.  subject to ERISA.

 

Fiduciary exposures- employee pension benefit plan

employee welfare benefit plan

Term
Discuss the risk control techniques used to manage fiduciary exposures. (p.21) 4 pts
Definition

Risk Control Techniques for Fiduciaries

Fiduciary/Trustee Board Composition

Procedural actions by fiduciaries

Delegation by fiduciaries

Avoidance of conflicts of interest

Term
Discuss the definition of Enterprise Risk Management (ERM) and the benefits of implementing an ERM program. (p. 4) 4 pts
Definition

Enterprise Risk Management is a systematic process of identifying, analyzing, assessing, and responding to ALL risks, regardless of the source, that affect the achievement of an organization's strategic and financial objectivess positively or negatively.

 

Benefits of implementing an ERM program:

identifies threats and opportunites

tcor analyze

saves operation costs

safeguards the organization's branding reputation

capitalize on opportunities

 

Term
Discuss how Traditional Risk Management (TRM) compares to ERM. (p. 12 - 4 pts
Definition

ERM:

perspective is that managing risk has the potential to affect both upside and downside.

tied to strategic objectives or key business objectives.

coordinated cross-functional treatment of risk across all areas of the organization.

uses subject-matter experts and risk committees to identify organizational risk that spreads accountability to risk owners and trains all stakeholders to be responsible for managing risks.

proactive and opportunistic

 

TRM

perspective is to manager downside risks.

oriented to cause-of-loss.

functional specific treatment of risk within an organizational area

places risk identification and ownership with risk manager only.

most often reactionary and defensive.

Term
Discuss the components and obstacles of ERM ImplementatIon (p. 17) 4 pts
Definition

Components of ERM Impementation

1. Support of the senior management team

2. An implementation leader and dedicated cross-functional committees

3. Framework for the process

4. an ERM risk assessment

5. A common language regarding risk

 

obstacles of ERM

lack of support from senior management

showing proff of tangible benefits

lack of a common language regarding risk

unclear responsibility and ownership of implementation

getting overwhelmed

perception of risk versus reality

funding

 

Term
Discuss how risk mapping is applied in ERM. (p. 23) pts 4
Definition

table of frequency and severity quadrants- risk mapping

 

Risk mapping applied in ERM:

Identifies and prioritizes key risks associated with business activities.

Assists business planning through the prioritization of risk treatment plans

Identifies areas requiring further analysis

Identifies specific risk responses

Facilitiates dialogue concerning risks across functional areas

Term
Discuss the common elements of an emerging risk and describe specific emerging risks. (p. 28) 4 pts
Definition

Common elements of an emerging risk:

high uncertainty

difficult to quantify

difficult to communicate

regulatory involvement

no industry position

 

examples of emerging risks:

financial risks- credit insurance

natural disasters- -floods

social media-breaches, and cyber attacks

panademic illness- ebola

e-commerce and dependence on technology-solar flares-network outages

food and water supply-contamination

global warming

rising medical costs and obesity

terrorism and politcal risks

 

 

Term
Discuss why management of an organization's reputation and brand is a critical function. (p. 3) 4 pts
Definition

critical assests of an organization

losses can single-handedly cause the organization to fail

susceptible to any type of disaster

can be damaged through no fault of the organization, its employees, or its representatives.

Term
Discuss the role of the risk manager in a crisis and the types and content of messages communicated during a crisis. (p. 5) 4 pts
Definition

The risk manager's role in crisis managemnt in most cases is two part: facilitate or bring others together within the organization.  To mitigate or reduce the financial impact of the crisis.

 

Content of messages communicated during a crisis:

clear concise- evacuation and safety instructions

rumor control, actions taken, concise description of event and current status, extent of damage and injuries known, actions taken to mitigate further loss and to provide treatment

Term
Discuss characteristics of appropriate acknowledgement of a crisis and guidelines for effective media relations and communication. 4 pts
Definition

acknowledge uncertainty

acknowledge tension and emotions as legitimate

acknowledge obvious mistakes and apologize

acknowledge the hazard and avoid over-reassurance.

 

guidelines for effective media relations

provide relevant information neccessary for an accurate depiction of the event

project authority, confidence, and a sense that a plan is in place to address the crisis

never provide misleading or falise info

never say  - no comment

avoid humor or an appearance of making light of situation

answer a question, but doesn't have to be the one asked- deflection

prepare the spokesperson on how questions not relevant to the event should be addresses.

have a designated spokesperson and limit unauthorized people from media exposure

it's ok to say i don't know yer and we'll update later

Term
Discuss how reputation and brand are affected by internal and external parties and the risk control techniques for this exposure. (p. 12) 4 pts
Definition

internal- corporate behavior

key employee behavior

marketing and communication

careless or negligent acts of employees

external-criminal acts, defamation, negative rude comments

 

risk control techniques- effective crisis management, implementation of a social media and blogging policy, codes of ethics, wesite gatekeepers

Term
Discuss the common types of intellectual property exposures and the related risk treatment options. (p. 16) 4 pts
Definition

common types of intellectual property exposures- patent, copyright, trademark, franchise, concession

 

risk control techniques- legal response, rely on observant employees or concerned 3rd parties voluntarily reporting infringemnts, surveys,

Term
What is RISK?
Definition

RISK is uncertainty that may be either positive or negative arising out of a given set of circumstances.

 

2 types of risk- pure and speculative

Term
What are the 6 general classes of risk?
Definition

The 6 classes of risk:

Economic

Legal

Political

Social

Physical

Juridical

 

 

Term
What are the two types of RISK?
Definition

One type of RISK is Pure Risk- examples chance or loss or no loss.

Second type of RISK is Speculative Risk- which is a chance of loss or gain.  Example Stock market.  Often referred to as a business risk

Term
What is an Economic Risk?
Definition
Economic- risks arising from operations, economu, financial marketplace, or entrepreneurial activities.
Term
What is a Legal Risk?
Definition
Legal- risks inherent in compliance or arising from statutory liability
Term
What is a Political Risk?
Definition
Political- risks arising from changes in the law, government reinterpretations, changes in government policy or changes in political environment.
Term
What is a Social Risk?
Definition
Social- risks arising from public relations, loss of reputation, damage to brand, cultural issues, social direction or social media.
Term
What is a Physical Risk?
Definition
Physical- risks arising from property, people, or information
Term
What is Juridical Risk?
Definition
Juridical- risks arising from a jury or judge's decision or from court or jury attitudes.
Term
What is Risk Management?
Definition

Risk management is the process of managing uncertainty of exposures that affect an organization's assets and financial statements using five steps:

identification, analysis, control, financing, and administration.

Term
What are the five steps of the risk management process?
Definition

5 steps of the risk management process:

Identification

Analysis

Control

Finance

Administration- Implementation and Monitoring

Term
Explain the first step in the risk management process.
Definition

The first step in the risk management process is identification of the risk.     Risk Identification is the process of identifying and examining exposures of an organization.  Four classes of exposure-property, human resources, liability, and net income.  Methods of identification include using multiple tools including flowcharts, checklists, surveys, insurance policy reviews, physical inspections, compliance reviews, procedures and policies reviews, experts, financial statement reviews, loss data analysis.

This is the most important step because without identifying the risk first, you can not apply any of the other steps and effectively risk manage.  Identification is the key step of the risk management process because an exposure and/or risk must be identified before it can be effectively analyzed, controlled, or financed.

Term
Describe the 2nd step of the risk management process.
Definition
Risk Analysis is the assessment of the potential impact of thevarious exposures on an organization.  Involves both Qualitative and and Quantative Analysis.  (the what and how much)
Term
Explain the 3rd step of the risk management process.
Definition
Risk Control- Any conscious action or inaction to minimize, at the optimal cost, the probability, frequency, severity, or unpredictability of loss.
Term
What are the five techniquies of risk control?
Definition

Five techniques of Risk Control:

  1. Prevention
  2. Avoidance
  3. Reduction (pre and post loss)
  4. Transfer (contractual,physical, both)
  5. Segregation/separation/duplication
Term
What is the 4th step of the risk management process?
Definition
Risk Financing- the acquisiont of internal and external funds to pay losses at the most favorable cost.  Retentions, Transfer financial responsibility, Insurance.
Term
Let's talk about the 5th step of the risk management process.
Definition

Risk Adminstration is the 5th step and consists of 2 parts.

1. Implementation- implementing the desired actions and risk management plans.

2.  Monitoring- Examining and evaluating the results of risk management actions and plans.

Term
How does Risk administration support the risk management program?
Definition

How Risk Administration Supports the Risk Management Program:

1. Identifying skills, attributes, and traits required of a risk manager

2. Developing internal and external members of a risk management team

3. Using infonnation technology for communication, allocations, loss control, and loss development to properly identify and manage risks

4. Developing and implementing risk managemel policies and procedures

5. Addressing internal and external consulting issues

6. Addressing ethics in risk management

7. Addressing how risk management can be effective · within the organizational culture.

Term
What are the demands of an effective risk manager?
Definition

There are several demands of an effective risk manager. 

Many are classified as technical: identification of exposures, analysis of losses and exposures, selection and implementation of appropriate safety and loss control programs using cost-benefit analysis, claims and litigation management, selection and management of insruance agent/broker, arrangement of risk financing through retention, transfer, and insurance, review and negotiation of contracts, development and leadership of crisis management and business continuity programs, analyze results of accident investigations, participation in due diligence analysis. 

Some demands are managerial- planning, organizing, leading, controlling.

Term
What are the skill sets of an effective risk manager?
Definition

Skills sets of an effective risk manager are in three categories:

  1. Personal attributes: ethical, honest, has integrity, ability to stay level-headed/objective in a crisis, detail-oriented while capable of maintaining sight of the "big picture", desire to get the job done, proactive, solution-minded, creative risk taker, proven people skills that encourage support from all levels, change driven.
  2. professional and technical skills: strong written and oral communication skills, risk identification anaysis experience and training, experience with loss control programs and claims litigation management, knowledge of commercial insurance ocverages, financial analysis experience, knowledge of the risk management information system.
  3. Managerial skills and experience: knowledge of industry and organization, experience with general management and project management, experiece with negotiation and conflict resolution, successful leadership expereience and training
Term
What value does an effective risk manager add to an organization?
Definition

An effective Risk manager addes these values to an organization:

  1. Elevates the iportance and support of risk management
  2. Supports managerial decisions to achieve improved planning, budgeting, reduction of frequency and severity of losses, increased awareness of indirect losses, reduced risk to exposures from new operations, mergers etc.
  3. Improves morale and productivity among the work force.
  4. Improves quality, processes, and technology.
  5. Direct tie-in between benefits and risk management issues.
  6. Timely, accurate, and comprehensive data and reports from using an effective and integrated RMIS.
  7. Increases profitability (reduced costs or increased revenues)-reduces claims management and legal costs, optimizes cost of risk, protects cash flow, assets, and financial statements.
  8. Protects the organization's reputation and brand.

 

 

 

Term
What are the purpose, characteristics, and content of a risk management mission statement?
Definition

Risk Management Mission Statement

  • Purpose- states the purpose and overall goal of the risk management program and guides the actions and decision-making of the risk manager.
  • Characteristics- relatively short, clear, and concise.  Should be aligned with the organization's mission statement.  Used with all activities related to risk management.
  • Content- includes the priorities of the risk management program
Term
What are the purpose, characteristics, and content of a risk management policy statement?
Definition

Risk Management Policy Statement

  • Purpose- Defines the policy for managing risks and the relevance to the organization's strategic plan, goals, and objectives.  Clarifies risk management goals and direction. Outlines the fundamental guidelines of the risk management function. Focuses on fundamentals and addresses ideas that may not otherwise be presented to the organization.  Forces senior management to actively consider an organization's risk tolerance to increase the value of the risk management program. Clerly specifies responsibility and authority, opens up lines of communication, and minimizes duplication of efforts.
  • Characteristic- Should be one to two pages in length
  • Content- Refers to the risk management mission statement.  Addresses various areas of risk management. Incorporates the risk management philosophy and ethical considerations.
Term
What are the purpose, characteristics, and content of a risk management standard operating procedures manual?
Definition

Risk Management Standard Operating Procedures Manual

  • Purpose- reaffirms and communicates senior management's support for the risk managment program to all employees with a brief statement.  Defines Scope, responsibilities and authority of risk manager and others associated with the risk management program.  Establishes expected levels of performance and cooperation.  Familiarizes personnel with procedures to effectively manage risks and exposures.  Provides a convenient reference or how to guide- job safety, reporting prcedures for incidents and accidents, reporting procedures in accordance with insurance policy terms and risk management department terms, details of the insruance program
  • Characteristic- a lengthy document that can be from several pages to several hundred pages.
  • Content- LEtter of support from CEO, Risk management mission and policy statements, risk management department functions, ethical and regulatory considerations, Risk financing program-retentions philosphy, insurance info, procedures-safety and loss control, claims management, litigation management, OHSA reporting, return to work program, supervisor accountability,  Crisis management and business continuity plan.
Term
What are the purpose, characteristics, and content of a risk management stewardship report?
Definition

Risk Management Stewardship Report:

  • Purpose- provides an overview of risk management programs on a periodic basis to identify successes and opportunities for improvement.
  • Content- charts and graphs-used to communicate visually and succinctly, organization's core values-mission statements, policy statement, risk tolerance philosophy.  Total cost of risk, benchmarks-both time series and cross-sectional (internal and external), loss control program features and results, claims management updates on settlements/reserves, status of open litigation, insurance program summary, projects and initiatives, other key indicators of success and opportunities for improvement
Term
How do you effectively implement a risk management program?
Definition

Implementation:

  1. Gain support and commitment from senior management- the critical foundation for implementation.
  2. Communicate risk management frequently with employees throughout the organization, as well as relevant third-party service providers.
  3. Continually reinforce the commitment to risk management principles
  4. Create and have readily available an organization chart or flow chart showing interaction with other departments.
  5. Communicate frequently with the risk management team so the team members understand the goals and objectives of the risk management function and how it addresses insurance policy provisions, loss control, claims reporting, and the general treatment of risk.
  6. Solicit cooperation from all levels of management and as many internal personnel from the organization and external people as possible including executive management, middle management, all other employees.
Term
How do you effectively monitor a risk management program?
Definition

Monitor:

  1. Periodically review and update the risk management mission statement, policy statement, and standard operating procedures manual.
  2. Evaluate and report on the effectiveness of the procedures.
  3. The risk management reports and/or stewardship report should provide credibility to the risk management program and reassure management of the protection of the organization's assets and resources.
Term
Why does a risk manager need a risk management team?
Definition
A risk manager needs a team because:
Not every risk management function can be performed alone.
Information or expertise is needed form others within the organization.
Information or expertise is needed from others outside the organization.
Term
Who should be the members of a risk management team?
Definition
Members of the team:
internal or external
risk management
safety
environmental human resources
finance
operations and department managers
legal
insurance agent broker carriers
consultants
RMIS providers
captive managers
financial professionals
legal counsel
actuaries
private investigators and tracers
medical providers and medical case managers
certificates of insurance and surety providers- ISNETWORLD
MVR and claims search providers
other risk managers
Term
What is the purpose of insurance procurement providers?
Definition
To provide insurance expertise, loss control, international business advice, claims assistance and training, in addition to access to insurance coverages.
Term
Explain the selection methods used by risk managers for insurance and other service providers.
Definition
Appointment- providers are selected or appointed to represent the organization for all insurance coverages for a specific purpose; commonly known as AOR BOR
Request for proposal (RFP)-providers are 'invited' or requested to provide a proposal for insurance coverages; typically the providers are assigned markets from which they will obtain proposals and open bidding is on a 'first come, first quoted' system in which markets are not assigned.
Conceptual bidding-providers are invited to present general proposals, ideas, or concepts for handling insurance coverages and services without specific pricing of any coverage or service; the selected provider has complete access to the entire insurance market.
Term
What are the 7 general considerations when using bid specifications?
Definition
General Considerations when using bid Specifications
1. Identification of the parties and introduction
2. Description of the project or service.
3. Requirements
4. Time line
5. Costs
6. LEgal matters
7. Post-contract activities
Term
What are the advantages and disadvantages of Fees?
Definition
Fees:
Advantages- guarantees specific compensation to agent or broker for work performed, facilitates evaluation of value of services received, facilitates transparency of premiums and costs.
Disadvantages- increases total cost of risk for additional services required, may discourage competition and access to experience and expertise from other agents or brokers, requires adjustments when carriers will not write "net of commission", some states regulate fees in conjunction with commissions
Term
What are the advantages and disadvantages of Commissions?
Definition
Commissions:
Advantages- all requested services are included as part of placement, no separate negotiation of fees and premiums, flexibility in commissions may facilitate achieving client target premiums.
Disadvantages- makes evaluation of value of services difficult, disincentive to offer lowest reasonable premium, may overstate premium cost due to mon-disclosure of commissions and other compensation to agent or broker.
Term
What are the advantages and disadvantages of other agent/broker compensation sources?
Definition
Term
Explain the importance of effective communication for risk managers.
Definition
Since managers spend the majority of a typical workday in some form of communication, the communication process is important to understand and successfully manage within the organization for the following reasons:
1. The success and survival of the organization may depend upon it.
2. Improves cooperation with both internal and external risk management team members.
3. Better identifies environmental changes and allows the organization to readily adapt to external influences related to organizational goals, stakeholder expectations, and organizational performance.
Term
How do basic personality types affect the communication process?
Definition
Different personality types respond to the same information in a different manner, often depending upon how the information is presented.
Director/driver
Relater/amiable
Thinker/analytical
Socializer/expressive
Term
What are the five steps to effectively communicate risk management information?
Definition
55 steps of the communication process
1. Creation
2. Transmission
3. Reception
4. Translation
5. Response
Term
Details of each of the 5 steps of communication process
Definition
Creation- is ths a message that needs to be delivered? what is the appropriate medium needed to convey the info?

Transmission- is there a timeframe for transmitting the message? is it necessary to follow-up to ensure delivery?

Reception- how soon are you expecting a reply? what should the receiver do with the information and was that clear in your communication?

Translation- the receiver will test the message for understanding and expectations. te expectation is that the message was communicated efficiently and effectively.

response- was the response the desired action from the initiating the message? were there any communication barriers in steps 1-4 that influenced the response?

if steps aren't successful- repeat the process until it is understood and communication is complete.
Term
What is "noise" and how does it affect communication?
Definition
'Noise'- anything that distorts a message by interfering with the communication process; it can affect the process at any stage, take many forms, and may not be recognizable.

Message transmission is in a manner incompatible with the personality type of the sender or receiver
Ambiguous wording
External or internal distractions of sender and/or receiver
Misinterpreted gestures due to misunderstanding, diversity or experience or cultural differences
Term
Describe content-based communication.
Definition
Content-based communication:
detail-driven
fact based
advantages-direct and quick
disadvantages- lack of awareness of real issues and needs
little opportunity for feedback to confirm the receiver received and understood the message. receiver less willing to own the process or outcome, receivers may be unaware of larger issues and focus only on specifics of content.
Term
Describe context-based communication.
Definition
context-based
background, setting, framework, or construct aids in interruption and understanding of content
advantages- addresses deeper, more meaningful issues,
participants can have a clearer understanding of the issues and outcomes, leads to long-term collaboration, understanding and outcomes.
disadvantages- takes more time, personal agendas can distort the process and outcome, provides opportunities for objections to be raised
Term
What are the methods for accessing electronic data? Advantages and disadvantages?
Definition
Stand-alone personal computers- data and info can e secured through passwords, hardware can be secured to a desk etc with a locking device to prevent theft. Info sharing is time consuming, security and back-ups rely on diligence of the individual user
Local Area Network-data shared quickly yet still restricts access to local so more secure. offsite backups, emergency restoration requires a separate hot site

WAN- medium security, updates and backups faster, greater # of users and multpile locations increase risk of security viloations.

Internet- fast, accessible, maintenance fast, infrastucture free, reduces organizationl costs, higher vulinerability to unauthorized ussers, viruses, worms, malware, etc accessibility may be out of organization's control

Cloud computing- CSP is responsible for cost of security, hardware, software, etc. may reduce overall costs, facilitates business continuity, increased security and privacy issues, decreased flexibiilty, older systems and data formats may not be supported, dependency on cloud provider
Term
What are the uses of a risk management information system RIMS?
Definition
Supports the user in the key steps of risk management process.
Facilitates the consolidation of the following into one system- insurance policy info, claims info, property values, eposure info, exposure identification info. Information sharing, integration with other internal and/or external info systems, identification of trends and production of reports, loss forecasting, total cost of risk reports and allocations, actuarial studies, surveys to measure stakeholder satisfaction, ad hoc queries, dashboards, loss prevention
Term
What are the considerations when purchasing a RIMS?
Definition
short and long term cost benefits, currency of technology, system speed, security, licensing options and costs, alignment of system capabilities with organizational goals for risk management, basic system components and specialty component availability, turnaround time for data loads, data quality controk, flexibility in meeting organization's needs, quality of customer support, pricing, availability of related modules, foreign conversion/support, open architecture or custom programming, ease of data export and import.
Term
What is benchmarking?
Definition
The process of identifying who is the best, who sets the standard, and the identification of that standard. the process of comparing an organization's business processes and performance measures to another organization's processes and performance measures to provide a snapshot of the organization's performance and where it is relative to another standard.
Term
What are the steps in the benchmarking process?
Definition
benchmarking process:
Identify the area or process to be measured.
Identify organizations with similar areas or processes.
identify organizations who are leaders.
Survey those leading organizations for measures and practices.
Study those "best practices" organizations to identify leading edge practices. Implement new and improved processes reflecting those best practices.
Term
What are the advantages and disadvantages of benchmarking?
Definition
Advantages-encourages continuous improvement, helps prioritize areas in need of improvement, enhances creativity.

Disadvantages- data must be analyzed and judged; cannot be taken at face value, data can be easily misinterpreted, data errors, comparison problems.
Term
What is the rationale of a total cost of risk allocation system?
Definition
Rationale- In order to remain competitive, an organization must be able to track and properly provide for ALL types of organizational costs, including TCOR.
Term
What are the objectives of a TCOR Allocation system?
Definition
Identify factors contributing to the TCOR
Create accountability
Enhance loss control
Support the competitive advantage
Alter behaviors
Term
What are the steps involved in the TCOR allocation process?
Definition
1. Determine the desired goals and objectives.
2. Determine the costs to allocate
3. Select the allocation variables
4. Create the allocation model.
Term
What are the components of the TCOR allocation process?
Definition
Costs that can be allocated:
deductibles
SIRS
losses and loss expenses
insurance premiums
outside service fees
deparmental costs

TCOR -is
Term
What are the three methods for TCOR allocations?
Definition
Exposure based
Experience based
Combination method
Term
What are the purposes of due diligence activites?
Definition
To investigate documents and records of a business and/or person prior to signing a contract or entering into a business transaction; more commonly applies to voluntary investigations; however, in certain circumstances, the term relates to a legal obligation. To assess the health and viability of a business or entity. To perform an investigation of a business, situation, activity or person to assist with effective decision-making.
Term
What are the broad areas of due diligence activities?
Definition
Merger and/or acquisition
Purchase of new assets, particularly real property
Development and introduction of a new product or service
Undertaking of a joint venture or contract
Addition of key personnel, eg a new risk , claims or safety manager, a new account, new supplier or service provider such as an agent, broker or outside consultant.
Term
What is the difference between mergers and acquisitions?
Definition
Merger- two or more organizations create a new entity and agree to move forward as one and issue the appropriate ownership interests

Acquisition- one organization takes over another organization and is established as the new owner with the ownership interests continuing unchanged.
Term
What are the three types of structures involved in mergers/acquisitions?
Definition
Entity- buyer purchases all ownership interests of the entity
buyer assumes all assets and liabilities

Asset- buyer purchases specified assets and specified liabilities of the seller. The buyer does not acquire the entire entity.

Merger- two or more entities create a new entity and issue the appropriate ownership interests. Simultaneously, the entities transfer assets and liabilities from their respective organizations to the new entity. the original organizations are then dissolved and cease to exist.
Term
What are the four steps of the team approach to the merger and acquisition due diligence process?
Definition
Identification- company info, financial info, key exposure areas, risk management department,

Review and analysis-assemble and review loss runs by line of coverage, look for and analyze of loss history, open claims, retained losses, actuarial reviews of reserves, etc loss development and trending, identify pending litigation, specific property concerns, insurance coverage review,TCOR issues

Reporting- existing exposures, qualitative analysis, and quantitative analysis, recommendations to management

Post-transaction- onsite inspections of locations, determine impact on current insurance program, determine impact on other functions within the organization ex HR, administrative issues, claims procedures, service providers
Term
What are the common law duties of directors, officers, and fiduciaries?
Definition
Obedience
Loyalty
Diligence

Obedience- actions conform to legal standards and requirements

Loyalty- undivided and unselfish loyalty with no conflict between organizational duty and self-interest

Diligence- competent oversight of the organization in an expedient, knowledgeable manner using the standard of care of a reasonable prudent person in a similar position in similar circumstances.
Term
What is Directors and Officers Liability?
Definition
Liability resulting from a director or officer of an organization committing a negligent act or omission, misstatement, or misleading statement
Term
What are the five elements of the Business Judgement Rule?
Definition
Business Decision
Disinterestedness
Due care
Good faith
No abuse of discretion

Business decision- action must be taken in making business decisions. Not taking actions is protected if it was conscious decision not to act.
Disinterestedness- A decision must be made in an independent and disinterested manner without expecting personal financial benefit unless the decision results in a benefit to the organization and all of its stakeholders
Due care- a decision must be made based on reasonable and relevant information
Good faith- a decision must be made with an honest belief that the decision is in the best interest of the organization, not simply to preserve his or her position or benefits.
No abuse of discretion- a director or officer is protected against honest errors in judgement that can be justified by a rationale or that are not egregious on their face.
Term
What are the risk control techniques used to manage directors and officers exposures?
Definition
Board composition
Procedural actions by board members
Delegation by board members
Avoidance of conflicts of interest
Term
What is fiduciary liability?
Definition
Under the employment retirement income security act of 1974 (ERISA): liability imposed upon any person who exercises any discretionary authority or control with respect to the management or administration of an employee benefit plan or its assets.
Under common law: liability imposed upon a party who stands in a special relationship of trust with another party for a breach of trust.
Term
What are the Fiduciary exposures?
Definition
any plan, fund, or program established or maintained for the purpose of providing to its participants or beneficiaries employee benefits (ERISA)
Employee pension benefit plan- 401K
Employee welfare benefit plan- health insurance, day care, training, scholarships, etc
Term
What is the definition of Enterprise Risk Management?
Definition
Enterprise Risk Manageent is a systematic process of identifying, analyzing, assessing, nd responding to all risks, regardless of the source, tht affect the achievement of an organization's strategic and financial objectives positively aor negatively.  ERM goes beyond insurable risks, reaching into strategic, operation and financial risks, to include any activity that could threaten or enhance the achievement of an organization's objectives.
Term
What are the benefits of implementing an ERM program?
Definition

Benefits of implementing an ERM program

Identifies threats and opportunities related to an organization's strategic plan and objectives.

Closely links an organization's business, operational, and strategic objectives to the practice of managing risk.

Identifies and aalyzes the organization's total cost of risk.

Increases awareness of activities and associated risks, allowing for better managementof those activities and for refining and reducing the total cost of risk.

Uses performance metrics to drive improvement in decision making.

Provides a common language for communication about risks and opportunities.

Identifies risk owners across the organization.

Helps an organization minimize risks while maximizing opportunities and prioritizing resources.

Saves operational costs and safeguards the organization's branding and reputation.

Allows organizations to capitalize on opportunities to increase shareholder/stakeholder value.

Term
How does Traditional Risk Management compar to ERM?
Definition

ERM's perspective is that managing risk has the potential to affect both upside and downside.  TRM's perspective is to manage downside risks.

ERM is tied to strategic objectives or key business objectives.  TRM is oriented to cause-of-loss.

ERM is a coordinated cross-functional treatment of risk across all areas of the organization.  TRM is functional specific treatment of risk within an organizational area.

ERM uses subject-matter experts and risk committees to identify organizational risk that spreads accountability to risk owners and trains all stakeholders to be responsible for managing risk.  TRM places risk identification and ownership with the risk manager.

ERM is proactive and opportunistic.  TRM is most often reactionary and defensive.

Term
What are the components of ERM implementation?
Definition

Componets of ERM Implementation

  1.  Support of the senior management team.
  2. An implementation leader and dedicated cross-functional committees.
  3. Framework for the process.
  4. An ERM risk assessment.
  5. A common language regarding risk.
Term
What are the obstacles of ERM implementation?
Definition
  1. Lack of support from senior management.
  2. Difficult to invest capital in the risk management program.
  3. Showing proof of tangible benefits.
  4. Unclear responsibility and ownership of implementation.
  5. Different skills are required to successfully implement ERM versus TRM.
  6. ERM requires techniques for upside risk analysis that TRM does not.
  7. Risk is viewed neatively in many organizations, so expanding to include upside risks may be difficult.
  8. ERM requires focus on creating or adding value, not avoiding losses.
  9. Lack of a common language regarding risk.
  10. Perception of risk versus reality; it is common to confuse the characterization of risk with the willingness to take risk.  Taking risk is often seen as a matter of courage rather than a reasoned, quality decision.
  11. Getting overwhelmed.  It's a slow process; identifying too many risks or lack or prioritization can bog down the process.
Term
How is risk mapping applied in ERM?
Definition

Identifies and prioritizes key risks associated with business activities.

Assists business planning through the prioritization of risk treatment plans.

Identifies areas requiring further analysis.

Identifies specific risk responses.

Facilitates dialogue concerning risks across functional areas.

 

 

Term
What are the common elements of an emerging risk?
Definition

High uncertainty

Difficult to quantify

Difficult to communicate

Regulatory involvement

o industry position

Term
What are some current specific emerging risks?
Definition

Social media

Pandemic illness

Reprecussions from natural disasters

E-commerce and internet dependency

Terrorism

Rising medical costs and obesity related medical conditions

 

Term
Why is management of an organization's reputation and brand a critical function?
Definition

Critical assets of an organization

Requires effective crisis management

Suseptible to any type of disaster

CAn be damaged through no fault of the organization, its employees, or its representatives.

Losses can single-handedly cause the organization to fail.

 

Term
What is the roll of the risk manager in a crisis?
Definition

In most cases, the risk manager has two roles:

1. Facilitating or bringing others together within the organization.

2. Mitigating or reducing the financial impact of the crisis.

Term
What are the types and content of messages communicated during a crisis?
Definition

Internal messages-evacuation and safety instructions, current intellegience on the situation, rumor control, expected duration of the crisis, actions taken and by whom, how future communications will be made, available assistance.

External messages-concise description of event and current status, extent of damages and injuries if known, actions taken to provide treatment and other assistance to those impacted, actions taken to mitigate further loss or damage, description of preparations made in advace for the crisis and how they are being implemented, indication of when operations are expected to return to normal, designation of official spokesperson and how future information will be distributed

Term
What are the characteristics of appropriate acknowledgement of a crisis?
Definition

Acknowledge uncertainty.

Acknowledge tension and emotions as legitimate.

Acknowledge obvious mistakes and apologize.

Acknowledge the hazard and avoid over-reassurance.

Term
What are the guidelines for effective media relations and communication during a crisis?
Definition
  1. Provide relevant information necessary for an accurate depiction of the event.
  2. Project authority, confidence and a sense that a plan is in place to address the crisis.
  3. Never provide misleading or false information.
  4. Never say "No Comment"
  5. Avoid humor or an appearance of making light of the situation.
  6. Answer a question; however you do not have to answer the question that was asked.  Deflection.
  7. Prepare the spokeserson on how questions not relevant to the event should be addressed.
  8. "I don't know" "We do not have all the details at this time" and "We will continue to cooperate with the proper authorities throughout the process are all acceptable answers to many questions, particularly if one does not know the answer to a specific question.
Term
How are reputation and brand affected?
Definition

Reputation and Brand are affected:

internally- corporate behavior, individual ehaviour of a highly visible employee or officer, marketing and communicatons, careless or negligent acts of employees

externally-criminal acts performed by outsiders that are responded too badly by employees, outsiders sometimes post negative or rude comments on an organization's website.

Term
What are the risk control techniques for protection brand and reputation?
Definition

Collaboration with other functional areas suck as HR, legal, marketing.

Establishment and enforcement of codes of ethics and behavior.

Website gatekeeper for comments made by outsiders.

Effective crisis management plan.

Implementation of a social media and blogging policy to include the following: clearly defined company philosophy, definition of social networking, identification of the person as an employee, recommendations or referrals, reference of any clients, customers or partners, confidential or propietary information, terms of service, copyrigt and other legal issues, guidelines for time spent on social networking in the workplace, consequences for violations

Maintenance of quality assurance programs.

Training employees in procedures and policies.

Term
Common types of intellectual property exposures.
Definition

Patent

Copyright

Trademark

Registered Mark

Service Mark

Trade Secret

License

Franchise

Concession

Term
What are the risk treatment options for protecting intellectual property?
Definition

Methods the organizations use to identify infringements:

Processes vary from organization to organization

Outsource to conduct surveys to determine if other organizations are using their intellectual properties.

Rely on observant employees or concerned third prties voluntarily reporting infringements.

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