Advantages And Disadvantages Of Risk Management
It is human nature to want to protect ourselves and our possessions in the event of unplanned circumstances. The insurance industry was created to cater for this need, and in the modern world where just about anything can be insured, it allows us peace of mind in our day to day lives.
Mildred (2000) depicts insurance as,
“One party (the insurer) promises in return for a money consideration (the premium) to pay to the other party (the insured) a sum of money or provide him with some corresponding benefit, upon the occurrence of one or more specified events.”
Insurance provides a guarantee of compensation for specified loss, damage, illness, or death in return for payment of a specified premium. There are many different types of insurance products for the everyday person to cover all our needs. Companies however, experience risk in an entirely
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Essentially, risk management occurs any time a manager analyses and attempts to quantify the potential for losses and then takes the appropriate action. It is important for a company to not only identify internal risk, but also external ones. External risk cannot be controlled by an organization but necessary precautions can be taken to ensure minimal loss in the case of an incident. In more recent times risk management theory it is agreed that not all risk is seen as negative with the area now focusing on both threats as well as opportunity. Your ability to manage change in a business environment is another key aspect of risk management, Maslow 's hierarchy of needs was created with the purpose to explain human motivation, and describes a pyramid of motivators going from survival(bottom) to self-actualisation(top)(Kaur 2013). Applying this theory to risk management can explain why organisations first think about threats, and why they see opportunities as optional extras to be addressed later (Hillson
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