BUSS 5292 Topic 4 Risk management strategies 代写
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Risk Management
BUSS 5292
Topic 4
Risk management strategies:
Private and public
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Course Facilitator: Kesten Green
Study Period 1, 2016
Possible risk management strategies
q Self regulation
(i.e., “moral sentiments”)
q Common law
(i.e., “unwritten customs”)
q Contract law
(both explicit and implied)
q Insurance &
diversification
(reallocating risk)
q Checklists
(evidence-based is key)
q Popular standards &
guides
(i.e., codifications of practice)
q Commercial services
(e.g., offerings of professional
services firms)
q Education &
communication
(i.e., help with understanding)
q Government regulation
(i.e., enforced behaviours)
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Self regulation
q As described in the first book by the father of
economics, Adam Smith…
The theory of moral sentiments (1759)
q We know what is the right thing to do in the
situation!
q Most people
q Most of the time
q Will mostly suffer disapprobation by doing wrong
q Will mostly benefit from approbation by doing right
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Common law
“In the English and American legal systems, the common law
(that is, judge-made law) of “torts" has long permitted one
citizen to recover damages from another for harms resulting
from such actions as nuisance (use of one's own property that
unreasonably interferes with the use of another's property),
negligence (conduct that unreasonably imposes risks on
another), and the pursuit of abnormally dangerous activities.
These grounds for lawsuits amount to risk management
in the sense that people must conform to a standard of
reasonable conduct (e.g., cleaning their chimneys, disposing
of waste products) or face the prospect of being liable and
successfully sued for damages.
Common law thus provides two risk management
functions—compensation and deterrence.”
Covello & Mumpower (1985, p. 41)
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Contract law
q Parties make contracts to undertake
specified actions in the future…
q so as to reduce the risk that they will be unable to
fulfil their plans
q Contracts need to be enforcable...
q so that when the future turns out to favour one
party more than the other, the more fortunate
party does no reneg.
q Contracts can be implied
q Assumptions of due care and caveat emptor
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Common law & strict liability
q Stressed in Hummurabi’s Code, and the Old
Testament
q The builder of a building that collapses and kills
someone shall be put to death
q “An eye for an eye, and a tooth for a tooth”
q Strict liability holds that the producer of a product
is liable for injuries regardless of fault or
negligence
q Out of favour during the 19 th and early 20 th
Centuries, in favour of need to show negligence
q Now somewhat back in favour with the courts...
6 BUSS 5292 Topic 4 Risk management strategies 代写
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Insurance and diversification
q Insuring or pooling the risk…
q Self-insurer makes own provision for risks
q Pooler shares risks with others
(e.g. families, mutual societies, guilds)
q Insurer takes on many independent risks for the
price of the expected value plus a profit margin
q Diversifiying or spreading the risk...
q Participation in differently risky ventures
(e.g. superannuation fund, multiple jobs)
q “Average” return (not very bad or very good)
(see Malkiel’s “Random walk down Wall Street”)
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Evidence-based checklists
Air travel is safer than a hospital visit. Why?*
q Commercial aviation has a positive error culture
q recognise that errors can happen (1 in 10,000,000 crash)
q admit to those that do, and share
q learn from them to reduce risk à evidence-based checklists
q Medicine does not
q fear that errors will happen
q hide those that do
q fail to learn how to reduce risk (1 in 10 harmed in hospital)
ü Checklists are low-cost and require no new technology,...
but must be evidence-based to avoid repeating errors.
ü Checklist of even familar items reduces risk, enormously...
*See Gigerenzer’s Risk Savvy for more detail.
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Example ICU checklist
(How to do it right, and reduce risk.)
For central venous catheter installation*…
q Wash hands with soap
q Clean patient’s skin with chlorhexidine antiseptic
q Put sterile sheets over entire patient
q Wear a sterile mask, hat, gown, and gloves, and
q Put a sterile dressing over the catheter site once the
line is in.
Checklist use reduced infection rate from 11% to 0%
(potentially 28,000 lives saved p.a. if adopted U.S.-wide).
*Pronovost in Gigerenzer’s Risk Savvy
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Popular* standards and guides
q See risk management examples via links under
Topic 4 on the course Learnonline site
q Guides and standards associated with what
Covello & Mumpower (1985) refer to as…
q Industrial self-regulation, and
q Licensure and certification
q Popular guides and standards can be evidence-
based…
q but are they in the relatively new field of risk
management?
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Commercial risk management services
See the small survey of commercial risk
management service offerings under Topic 4 on the
course Learnonline site.
Questions to ask…
q Is the service clearly explained?
q Is it clear what benefit clients could expect to obtain?
q What evidence is offered that clients would benefit?
q Do the service providers know the relevant evidence?
q What are their qualifications and experience?
q …
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Education and communication
Help to understand risk, and to explain risk…
so as to help managers and citizens…
make better…
risk management decisions
for themselves and
their organisations.
q This is different from the saying that people are…
q too stupid to make good risk management decisions
q and need to be “nudged”
q by “wise and selfless leaders”.
q The Risk Savvy book offers evidence-based guidance.
q Communication about risk is covered in Topic 10.
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Government regulation of risk behaviour
Covered in the
next topic,
Topic 5.
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BUSS 5292 Topic 4 Risk management strategies 代写
