Insurance in Risk

Management
By
V Ramakrishna

India Insure Risk Management Services Pvt Ltd

Corporate Governance

“ It is the acceptance by the management of the

inalienable rights of shareholders as the true owners
of the corporation and of their own role as trustees on
behalf of the shareholders”

- Committee on Corporate Governance

February 8th 2003
Corporate Governance is about…..
 Commitment to values
 Ethical Business Conduct
 Making a distinction between personal and corporate
funds
 Openness, Integrity & Accountability
 Maintaining confidence of investors- Foreign &
Domestic
 Induce stable source of financing
 Improving the economic efficiency of the firm.
Risk Management as part of
Corporate Governance
 Business is synonymous with Risk
 Structured definition and management of
risks.
 Board to be fully aware of the risks facing the
company
 Shareholders to know the process by which
the companies manage their risks
Need for Risk management
 Uncertainty in Enterprise
 Growing Complexity in Business Environment
 Statutory Obligations
 Contractual Obligations
 Social Obligations
Risk Management

 “Risk Management is the Identification,

Analysis and Economic Control of those
RISKS which can Threaten the Assets
(Property, Human) or the Earning Capacity of
an Enterprise”
The Universe of Risk

E N T E R P R I S E

O P E R A T I O N SF I N A N C I A L S T R A T E G I C K N O W L E D

P R O C E S S C A P I T A L S T R S U T C A T K U E R HE O L D I NE RT ES L E C
P R O P E R

P H Y S I C A L A S RS EE PT OS R T I N GG O V E R N A N IC N E F O R M A
M A N A G E

P E O P L E C R E D I T A N D M L A I QR UK IE D T I T S Y T R U S C Y T S U T RE EM

L E G A L M A R K E T
Process of Risk Management`
 Risk Identification
 Risk Measurement
 Risk Control
 Risk Transfer
 Risk Financing
 Risk Retention
 Risk Assessment

FINANCIAL IMPACT:
Threshold Limit to be decided
based on Medium Risk Very High Risk
Size of the corporate

Probability
Financial Impact

PROBABILITY OF
OCCURRENCE:
Organization history & Industry Low Risk High Risk
Experience
to be considered
 Handling Risk
Risk Levels

Low & Medium Normal Monitoring at the operational level

High Close control of all potential contributing factors by the Risk

Management Team

Very High Risks of this level should be actively tracked for decisions by
the Risk Management Committee.
Enterprise Risk Management

Safeguard
Risk
existing
optimization
value

Financial engineering of risk

and capital
 Insurance
 All Risks are not Insurable
 Essentials of Insurance
 Insurable Interest
 Utmost good faith
 Procedure for Insurance
 Identification of Risks
 Quantify the Insurable value
 Evaluate the choices
 Proposal
 Payment of premium
 Policy Documentation
 Claims
 Administration System
Insurable Risks

PROPERTY RISKS PEOPLE RISKS

Damage to Physical Assets Loss to Employees
 Acts of God  ILL Health and accident
 Accidents  Death
 Break down  Overseas travel

FINANCIAL RISKS LIABILITIES RISKS

Monetary Loss from Loss from Operations
 Theft and Burglary  Product liabilities
 Business interruption  Public liability
 Bad credit  Directors & Officers liabilities
 Errors & Omissions liabilities
Focus Areas for Insurance
Management
 Identification of Internal & External Pure Risks
 Existing Risk Control Measures Review
 Risk inspection
 Risk Audit
 Scrutiny of Existing Insurance Covers
 Coverage
 Rates & Deductibles (Compulsory self insurance)
 Defining Standard SOP for Claims Control
 Guidelines on documentation
Key Areas of Consideration
 Choice of Insurer
 Industry Rating
 Claims Settlement ability
 Sustainability of the company
 Service levels & infrastructure
 Choice of Intermediary
 Representation of the insurance market
 Knowledge of insurance amongst all industry segments
 Service levels & infrastructure
Emerging Challenges

 De regulation of Indian Insurance market

 Global markets impact on Local market

 Options for self insurance

 Market driven pricing

Thank you

India Insure Risk Management Services Pvt Ltd