Question

What is the difference between applying risk measures for insurance purposes versus applying risk measures for compliance? Provide an example and explain how both have significant value to a business.

Answer 1

Answer:

Risk management and measurement are both tools that help an organization develop tactics and strategies to minimize financial liability and support business continuity. Though one looks at risk from a holistic perspective and the other is used to quantify the risk to facilitate a company’s decision-making process.

Risk management is a proactive process of identifying, prioritizing, analyzing, and mitigating any internal or external risk. The purpose of risk management is to reduce the impact of undesirable and unforeseen risks.

On the other hand, risk measurement is a function of quantifying the probability and potential magnitude of the loss of any risk on an organization. It is an element of risk analysis and a critical tool that supports risk management.

Explanation:

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