RISK


The entire business process has to face numerous risks and uncertainties. Risks arise due to uncertainties in regard to cost, loss or damage. In business, risks include changing demand and fashions, price falls, change in the market conditions, new inventions, fire, flood, accidents etc.
 In the words of Boon and Kurtz, "Risk is the chance of loss or injury." It may or may not happen. In business, the risk may be defined as the danger or loss from unforseen circumstances. It implies a possibility of loss due to unpredictable happening in the future

Types of Risks
The risks may be classified as

1. Pure and Speculative Risks
Pure risk refers to those situations that involve the chances of loss or no loss. For example, a car can meet with an accident or it may not meet with an accident. Speculative riskrefers to those situations where there is possibility of loss break-even or even a profit Pure risks are generally insurable, while the speculative risks are no
2. Dynamic and Static Risks
Dynamic risks arise from the changes that take place in society like economically, socially, technologically or politically. These are difficult to anticipate, whereas static risks are more or loss predictable. Dynamic risks closely resemble speculative risks and pure risks are examples of static risks.

3. Fundamental and Particular Risks Fundamental risks are those which affect the whole society like floods, wars etc. Particular risks.are confined to individuals or smaller groups. Eg. theft, fire etc.
 4.Quantifiable and Non-quantifiable risks
The risks which can be measured are known to be quantifiable, while the situations which may result in consequences like tension or loss of peace are called non-quantifiable.

 5. Financial and Non-financial Risks

 If any risk is concerned with financial loss, it is termed as a financial risk. If a risk does not involve financial loss, it is known as non-financial risk.
 It is obvious that to avoid risks is impossible since all choices and actions contain risk. Our challenge therefore, to select the risks carefully, quantify them and ensure that the benefits are greater than loss.

Comments

Post a Comment

Popular posts from this blog

Insurable Interest

Image
In simple words, insurable interest means monetary Insurable Interest interest. No person can enter into a valid contract of insurance unless he has insurable interest in the subject matter of insurance. A person is said to have insurable interest in the subject matter, if he suffers financially, by its loss or destruction. Thus a person has insurable interest in his own life, in the life of his spouse or child or debtor. Similarly the owner of a property has an insurable interest in it. It is also important, to know the time at which the insurable interest must exist to execute a valid contract of insurance. It depends on the branch of insurance. In the case of life insurance, the insurable interest must exist at the time when the policy is taken. It may not be in existence at the time of the death of the person whose life is insured. For eg. A creditor can insure the life of his debtor to the extent of the debt. Even if the debtor dies after paying off the debt, the creditor ca...
Read more

Definition - Fire Insurance

Image
Definition A fire insurance may be defined as "a contract by which the insurer undertakes, for a money consideration, to indemnify the insured against the consequences of a fire during an agreed period upto the amount stated in the policy.'  According to V.R. Bhushan and Prof. R S. Sharma, a fire insurance may be defined as "an agreement whereby one party, in return for a consideration, undertakes to indemnify the other party against financial loss which he may sustain, by reason of certain defined subject-matter being damages or destroyed by fire or other defined perils upto an agreed amount." The main purpose of a fire insurance contract is to protect the insured against the loss of his property by fire. A fire insurance contract is a contract of indemnity. It indemnifies the insured against any loss caused by fire. To get compensation for loss of property under fire insurance, it must be proved that the loss of property has arisen due to fire. It is also...
Read more

Requirements as to Capital Structure and Voting Rights and Maintenance of Registers

Image
According to section 6A of the Insurance Act, 1938, the following provisions should be made with regard to the requirements as to capital structure and voting rights and maintenance of registers: 1 . A public company limited by shares having its registered office in India, shall carry on life insurance business only, if it satisfies all the following conditions, namely: i. that the capital of the company consists only of ordinary shares each of which has a single face value ii. that the paid-up amount is the same for all shares whether existing or new, except during any period not exceeding one year allowed by the company for payment of calls on shares; 2 . The voting right of every shareholder of any public company as aforesaid shall in all cases be strictly proportionate to the paid-up amount of the shares held by him. 3 . A public company which carries on life insurance business shall not issue any shares other than ordinary shares of the nature specified in sub-sectio...
Read more