Wednesday, October 7, 2009

What is risk identification

Risk Identification: It means to identify the sources & reasons of expected losses. There are various methods of identifying exposures. For examples, comprehensive checklist of common risk exposures can be obtained from risk management consultants & other sources. Loss exposures can also be identified through analysis of firm’s financial statements, discussions with managers through the firm, surveys of employees & discussion with the risk management consultant & insurance agents. Regardless of the specific method used, risk identification requires an overall understanding of business & specific legal & regulatory factors that affects the business.

One method of identifying individual exposures is to analyze the source & uses of funds in the present and planned for the future. Potential events that decrease in availability of funds or increase in the uses of funds represent risk exposures.

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