Techniques of Risk Management

22-Jan-2024 17:45 PM

Five techniques of risk management:

  • Avoidance
  • Retention
  • Spreads
  • Loss prevention and reduction
  • Exchange (through insurance and contracts)

Risk Avoidance: In many cases it is not possible to completely avoid risk, but the possibility should not be overlooked. So water problem often occurs in some buildings and some areas in the campus. By not allowing records or materials to be stored in those areas, you can avoid some water damage claims.

Retention: Sometimes, based on the frequency and severity of risks presented, retaining a risk or part of a risk may be cost-effective, even if there are other methods of dealing with the risk. When losses occur, the cost of repairs is absorbed by the campus maintenance budget, except in situations involving negligence of third parties. Even with insurance, the university retains the risk of loss for most university personal property.

Spreading: It is possible to spread the risk of loss to property and persons. A small fire in a room can destroy entire records of a department's activities. Placing people in a large number of buildings instead of a single facility can help spread the risk of loss of life or injury.

Loss Prevention and Mitigation: When risk cannot be avoided, the effect of loss can often be reduced in terms of frequency and severity. The university requires students studying abroad to purchase medical insurance so they can cover medical expenses in another country.

Transfer: In some cases risk can be transferred to others, usually by contract. When outside organizations use University facilities for public events, they must provide a certificate of insurance and name the University as an additional insured under their policy, thereby transferring the risk of the event from the University to the facility users. Buying insurance is also referred to as risk transfer because the policy actually contractually transfers the financial risk of loss from the insured to the insurance company. Insurance should be a last resort and used only after all other techniques have been evaluated.

Contracts: Often sellers and service providers seek to absolve themselves of all liability for their actions in relation to the contract by contract. These are often referred to as "hold harmless or indemnity" clauses. Because of the complexity of interpreting these provisions, the President has delegated contracting authority for the University only to the Contracts and Procurement staff. The University Risk Management Office reviews contracts and agreements solicited by contracts and agreements to identify and assess risks, assess insurance standards, and review indemnification and indemnification provisions. The chancellor's office requires that the university in most cases obtain not only a certificate of insurance but also an accreditation.