If you want to manage risk within your firm, you need to familiarize yourself with risk-management language. Here are some basic definitions, provided by the National Alliance for Insurance Education & Research, which you can use to build your knowledge base:
- Exposure: A situation, practice or condition that might lead to a loss; an activity or resource (assets, people).
- Peril: A “cause” of loss; an event that might cause a loss.
- Hazard: A condition within an exposure that might lead to an incident; “a peril about to happen.”
- Incident: An event that disrupts normal activities and might become a loss or claim; “a near miss.” Lifecycle of an incident: Pre-incident, incident, immediate post-incident, post incident, rehabilitation (repair, recovery).
- Accident: An incident resulting in injury or damage to person or property which has, or will become, a loss or claim; “an unplanned event definite as to time and place that causes bodily injury or property damage.”
- Occurrence: An accident with the limitation of time removed.
- Loss: A reduction in value.
- Claim: A demand or obligation for payment as a result of a loss.
- Frequency: The number of times an incident occurs.
- Severity: The monetary impact of a loss.
- Expected losses: Loss projections (“loss pics”) based on probability distributions and statistics; frequently developed using actuarial techniques.
For a complimentary review of the risks your business faces, please feel free to contact us at any time.