Corporate Risk Management - Essay Example

In the past years, companies had a risk manager who would oversee the organization’s insurance purchases. In addition, the extent and undertaking of corporate risk management has drastically changed and expanded beyond insurance to comprise all types of corporate in use and tactical perils. Risk describes both the probability and severity of a loss event. Probability delineates the likelihood of the occurrence of the loss while severity denotes the magnitude of the loss in a given period. All organizations face risk and the resultant potential losses on a daily basis (Lim, 2010, p. 234). They willingly accept risks with hopes of gaining financial return.

Intercontinental hotel is an example of a venture that is taking risks. An organization may be exposed to loss exposures that offer an opportunity to gain or not to gain. Pure loss exposures are exposures that offer Intercontinental Hotel potential for losses and no opportunity to gain. These pure loss exposures include “asset exposures, personnel exposures, liability exposures and consequential loss exposures” (Merna & Al-thani, 2011, p. 167-169). Loss exposure has three primary elements.

It describes the item subject to loss, the peril and cause of the loss and the financial effect of the loss. In loss exposure, the organization must have a loss of anything that could be assets, personnel or liabilities (Merna & Al-thani, 2011, p. 170). Personnel Loss exposures People are the principal inputs in an organization in generation of income. People could either be employees of a firm or belonging to a certain household. The loss of humans is indispensable as human capital cannot be replaced and that no value can be placed on human life.

Personnel loss exposure refers to the probability that an organization will suffer a financial loss because of disability, retirement, death or resignation of primary employees (Siljander, 2008, p. 190). Intercontinental Hotel faces personnel loss exposures which, according to Lim (2010, p. 239), includes the “disability insurance, workers compensation insurance, long term care insurance, medical insurance and Medicare supplemental insurance”. Nonetheless, Intercontinental Hotel generates for the organization through effective risk management.

In order to effectively manage the loss of personnel in the organization, it is essential to understand the value that each personnel contributes to the organization, and identify and evaluate the risks and dangers that affect the value of generation and operation of the company (Lim, 2010, p. 237). Intercontinental Hotel apprehends the value that each of its employees creates and then analyzes the dangers that affect the significance of its generation. In addition, the organization assesses the magnitude of the loss suffered after the occurrence of personnel peril.

A loss of personnel in Intercontinental Hotel raises two further risk management concerns as to the employer’s liability in administering and funding the employee benefit plans and the uncertainties involved in funding such plans. The personnel in any organization have a financial value to the organization. As according to Carrel (2010, p. 142), they assist in generating income for the organization. Moreover, the services that personnel render to the organization are valuable and cannot be replaced.

In this regard, the financial value of an individual in an organization