Risk management refers to the decision-making and action process of risk identification, risk estimation, risk evaluation and risk control in order to reduce the negative impact of risks. With the social development and scientific and technological progress, there are more and more risk factors in real life. Both enterprises and families are increasingly aware of the necessity and urgency of risk management. People come up with various ways to deal with risks. However, no matter what method is adopted, a general principle of risk management is: to obtain the greatest protection at the lowest cost. ?
There are four ways to deal with pure risk: avoiding risk, preventing risk, maintaining risk and transferring risk. ?
(1) Avoiding risks Avoiding risks refers to the possibility of actively avoiding losses. It is suitable for dealing with risks with high loss probability and degree, such as not swimming when considering the danger of drowning. Although avoiding risks can fundamentally eliminate hidden dangers, this method obviously has great limitations. Its limitation is that not all risks can or should be avoided. For example, accidental personal injury, no matter how careful, this risk can never be completely eliminated. Another example is refusing to take the bus for fear of accidents. Although the risk of accidents can be completely avoided, it will bring great inconvenience to daily life and is actually not feasible. ?
(II) Risk prevention Risk prevention refers to taking preventive measures to reduce the possibility and degree of losses. Building water conservancy projects and building shelterbelts are typical examples. Risk prevention involves the comparison between current cost and potential loss: if the potential loss is far greater than the cost of taking preventive measures, risk prevention measures should be taken. Taking the construction of a dam as an example, although the construction cost is high, it is extremely necessary to consider the huge disaster caused by the flood needle. ?
(3) Self-retention risk Self-retention risk means that you take risks on your own initiative irrationally or rationally. "Irrationality" refers to exposure to risks due to the existence of fluky psychology or underestimation of potential losses; "Rationality" means that after correct analysis, it is considered that the potential losses are within the tolerance range, and it is more economical to bear all or part of the risks by yourself than to buy insurance. Therefore, when making a "rational" choice, the retained risk is generally suitable for dealing with risks with low probability of occurrence and low degree of loss. ?
(4) Risk transfer Risk transfer refers to transferring all or part of the risks you face to the other party through some arrangement. Obtaining guarantee by transferring risk is the most widely used and effective risk management method. Insurance is one of the risk management methods to transfer risks. ?
Risk management and insurance are closely related in theory and practice. From the theoretical origin, insurance first appeared, and then risk management appeared. The theory of insurance essence in insurance is not an important part of the theoretical basis of risk management, and the development of risk management largely benefits from the in-depth study of insurance. However, the subsequent development of risk management is also constantly promoting the development of insurance theory and practice.
In practice, on the one hand, insurance is one of the most important and commonly used methods in risk management;
On the other hand, by improving the level of risk identification, risks can be evaluated more accurately, and the development of risk management plays an important role in promoting the improvement of insurance technology. ?
To improve the level of risk management, the most important link is to improve the level of risk awareness. The development of probability theory provides a scientific method for deepening the understanding of risk, quantifying risk and improving the level of risk management. The premise of calculating pure premium is to know the probability distribution of potential losses. In practice, based on probability theory, the probability distribution of accidents is estimated by using empirical data. Therefore, probability theory is the mathematical basis of insurance. ?
"Law of large numbers" is an important law in probability theory, which reveals a law that a large number of random phenomena that appear repeatedly under certain conditions will show certain regularity or stability. For example, we know that the probability of throwing a coin with uniform mass distribution is 0.5, but if we do 50 experiments, the number of times of head-up is likely to be very different from the expected 25 times. In other words, there may be a big gap between frequency (positive times divided by experiment times) and objective probability. But if you do 10,000 or more experiments, the difference between statistical frequency and objective probability will be very small. Because of the law of large numbers, the overall effect of a large number of random factors will inevitably lead to a result that does not depend on individual random events. This law is of great significance to insurance management. As we know, insurance behavior is to concentrate scattered uncertainties and turn them into approximate certainty to share losses. According to the law of large numbers, the more homogeneous the insured object is, the closer the actual loss result will be to the expected loss result. Therefore, the premiums charged by insurance companies plus losses compensation can basically be balanced.