Essay on the Basic Components of the Framework of Risk Management

Paper Type:  Course work
Pages:  3
Wordcount:  618 Words
Date:  2021-06-14
Categories: 

The process of risk management is founded upon the procedures and techniques that companies can make use of to play down the risk of liability and the moment a problem occurs, to lessen the impact. Effective management of risk is meant to give the answer to several questions such as what may go wrong, in what way will a company respond in the event that a particular thing goes wrong, and if a financial loss comes about from an issue of risk management, in what way will the bills be paid? The essential components of the framework of risk management revolve around the identification of risk; evaluation of risk; reduction and elimination of risk; and the transfer of risk (McNeil, Frey & Embrechts, 2015).

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When it comes to matters of risk identification, the most time proven method is the review of incidents. Besides, in the risk identification stage, raw data on the risks facing a certain company are developed from safety inspection, incident reports, and ongoing communication with all the frontline supervisors. Risk evaluation is all about the analysis of data by risk managers, and risk exposure areas are outlined. It is also worth mentioning that in the risk identification stage, determinations are made with respect to the severity of risks encountered.

Risk reduction and elimination require the management and the executives to see to it that the workplace environment at the disposition of employees is free from hazard as per OSHA requirements. Reduction of risk also resonates with reducing the chance of incidents that would lead to lawsuits, and minimizing the final costs of the claims in case bad comes to worse. Finally, risk transference is the fourth method of risk management and is most commonly achieved through insurance.

Financial Impact of Safety Programs in the Workplace

It is no secret that for an organization to realize a workplace environment that is safe and secure for workers, a lot of money has to be spent. Money is spent through compliances (the risk is legal battles in court); insurances; installations and observations as per OSHA stipulations; and in the payment of risks identification and assessment teams. All the same, it is worth mentioning that in as much as a lot of money is spent in the short term when it comes to risk management, the long-term benefits are usually very visible for organizations who take that step of faith (Van Deventer, Imai & Mesler, 2013).

Occupational Health and Safety Act

The Occupational Health and Safety Act is a major legislation in the United States that imposes conditions on dealing with employees and job applicants. It is usually defined as a branch of the United States labor department that is charged with the responsibility of establishing and putting into force health and safety standards in places of work. The Act requires employers to make sure their workplaces are not characterized by any form of discrimination, compensation malpractices, and hazards that can be avoided. In the event that an employer violates any of the OSHA requirements and employees get hurt, litigation and even foreclosure of the business in question can result.

Risk Transference

The process of transferring financial risk is mostly done through insurance. Insurance programs are tailored to harbor against catastrophic losses to the organization that could impact its capacity to go on as a going concern. Insurance harbors against severe fire damage, a major malpractice, embezzlement, and discrimination among other things that may characterize a workplace.

References

McNeil, A. J., Frey, R., & Embrechts, P. (2015). Quantitative risk management: Concepts, techniques and tools. Princeton university press.

Van Deventer, D. R., Imai, K., & Mesler, M. (2013). Advanced financial risk management: tools and techniques for integrated credit risk and interest rate risk management. John Wiley & Sons.

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Essay on the Basic Components of the Framework of Risk Management. (2021, Jun 14). Retrieved from https://midtermguru.com/essays/essay-on-the-basic-components-of-the-framework-of-risk-management

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