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Risk Cost Analysis
Learning Objectives
By the end of this chapter, you will be able to:
• Apply the fundamental risk formula of R = P × I to an actual risk situation.
• Define risk cost analysis, contingency allowance and reserve, and risk premium.
• Identify whether a given risk has a high or low degree of variation and apply the appropriate strategy in preparing to manage it.
• Conduct a risk cost analysis and extrapolate the effect of different risk outcomes, using concepts of standard deviation, secondary risk, residual risk, and black swan events.
• Apply exclusion, capping, and reinsurance as strategies for managing black ...
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