NAME : COURAGE MUNZARA FACALTY : COMMERCE PROGRAMME : RISK MANAGEMENT AND INSURANCE

Analyze the cost of risk The existence of risk and the nature of it being the state of the word, “risk” is associated with everything we do in life. This in the today’s world, business risk and the ability to quantify that risk in monetary form is proving to be of equal importance. Therefore, any risk manager’s core objective is to manage enterprise wide risk, leading to a fall in total costs associated with risk exposures. Due to these factors cost of risk has taken form, showing the dollar value of managing these risks and ways of reducing, preventing and controlling them effectively
The concept in cost of risk was introduced by, a risk professional named Douglas Barlow in the late 1959 to 1972. This concept in his view was like a formula for all the factors related to management of risk. Ultimately the cost of risk was then defined by disintegrating it into four basic components which makes up the structure of the concept namely the cost of actual losses sustained, cost of measures for loss prevention, insurance premiums, and administrative expenses. In short the above elements make up the formula for cost of risk.
COST OF FUNDING LOSSES
As one of the major element in cost of risk, which is widely used and tracked is the insurance premiums. Which is associated with spending on insurance coverage and paying up brokers’ commissions. Insurance companies are one of the largely solutions undertaken by firms in order to limit risk by way of risk transfer in the event of an insured loss. This method has proved to be cost effective as it eliminates the chances of a firm being left vulnerable in the event of a loss occurring. Net insurance premiums is also