Risk Management for Enterprises and Individuals
Etti Baranoff, Virginia Commonwealth University
Patrick Lee Brockett, University of Texas, Austin
Yehuda Kahane, Tel Aviv University
Copyright Year: 2009
ISBN 13: 9780982361801
Publisher: Saylor Foundation
Conditions of Use
The text provides a nice overview of the risk measurement and the nature of risk in various situations (e.g., legal liability, workers compensation, auto and property ownership, etc.). It focuses heavily on "risk financing" (usually via... read more
The text provides a nice overview of the risk measurement and the nature of risk in various situations (e.g., legal liability, workers compensation, auto and property ownership, etc.). It focuses heavily on "risk financing" (usually via insurance), while at times neglecting "risk reduction." The discussion is often confined to pure risks - those that are insurable. It does not address the connection between organizational goals and risk management decisions.
I did not find any inaccuracies in my review of the text. The concepts are consistent with other risk management textbooks.
The text was written in 2009 and is relevant enough to service most modern risk management courses. The text (understandably) does not cover recent topics in insurance such as rise of insurtechs, the advent of big data in insurance pricing, and the expansion of microinsurance in developing economies. These topics are quite important, such that a supplemental text may be necessary for a more up-to-date understanding of insurance markets.
The concepts are clearly explained and understandable to those learning about risk management and insurance for the first time.
The terminology in the text is both internally consistent and consistent with that of most other risk management texts.
Modularity could be improved by organizing the chapters into units. For instance, the first unit could be titled "introduction to risk and risk management" and include chapters 1-5. Instructors could then utilize specific units that are relevant to their course.
The organization of ideas is sensible. The text begins with an introduction to risk and risk management and then proceeds to discuss general risk financing techniques. The last several chapters discuss specific real-world situations involving risk. I present my course material in a similar manner.
I did not encounter any interface issues in my review of the text.
I did not encounter any grammatical issues in my review of the text.
The text is not culturally insensitive or offensive, but could be even more inclusive if the author were to pay particular attention to this point. For instance, they could discuss the disparate impact of risk on various subgroups or the use of racial proxies in insurance pricing.
The book is incredibly well written and a great (free) resource for students and faculty alike.
The book covers primarily the financial side of risk management. The first five chapters would be very useful to a traditional Business Continuity and Risk Management course, covering definitions of risk management, the nature of risk, risk... read more
The book covers primarily the financial side of risk management. The first five chapters would be very useful to a traditional Business Continuity and Risk Management course, covering definitions of risk management, the nature of risk, risk measurement, attitudes and tools, but it really doesn't touch on Business Continuity planning beyond insurance recovery ... supplemental materials would be necessary. There sections of the material beyond Chapter 5 that could also be incorporated on a limited basis ... Chapter 11 on Property Risk Management, Chapter 15 on Multirisk Management Contracts: Business, and small sections of Chapters 20-22 which discuss employment and employee health risk management (could be combined with supplemental materials on succession planning, employ safety and security, etc.).
In the sections that I would find useful, basically chapters 1-5, I found the information very accurate. There are a few things that I might present a little differently or in a little different order, but nothing that is inaccurate.
I think the content purely based on the risk management process and techniques is current and up-to-date. It's difficult to speak to the accuracy of the financial sections on insurance, social security and workers compensation since the material was written in December of 2009 and there have been so many changes to financial markets, instruments and the health industry since that time.
I found the writing to be easy to understand and the diagrams that were provided were relevant, useful and clear to read, with explanations that tied them in well with the surrounding text. As an example, Figure 1.1, a "Complete Picture of the Holistic Risk Puzzle" does a great job outlining the potential areas of risk that must be considered by an organization, and the preview explanation was quite simple. I also think the use of footnotes helps with the clarity, allowing students to quickly reference additional materials that helps to explain the content in more detail.
The book uses very common risk management terminology in the first five chapters that are most related to traditional risk management. Very consistent to industry standard terminology. Risk identification, risk analysis/assessment, risk evaluation, risk prioritization, risk treatment and risk monitoring are all featured ... normally the standard six steps to risk management
What is in the text is modular by chapter, very easy to split into sections and assign. There will need to be additional materials assigned to complete the course in a business continuity and detailed risk management setup, but the text available from this resource is useful in modules.
Very ordered, very sequential, easy to follow through the process of risk management. The 23 chapters flow into each other nicely. There are useful case studies at the end of each chapter, as well as key takeaways listed and discussion questions useful for in-class or assigned discussions. I also liked the "Review and Practice" sections by chapter ... they provide great potential open-ended test questions.
I found no interface issues in the entire text.
I found no gramar issues in the entire text.
The text is definitely NOT culturally insensitive or offensive. I do believe there is room in today's environment for a greater discussion of diversity and its impact in risk areas and on risk probability and impact calculation, but I have not seen this in ANY risk text that I have reviewed or evaluated.
I think that this is an excellent start for the OER materials needed to develop my "Business Continuity and Risk Planning" course. Being new to OER, it feels to me like the process of developing a course (and the materials supporting it) change slightly from traditional textbook methods. Traditionally, we found a text and developed our courses primarily around that text with just a few supplemental materials. With OER, the open field of content and the sheer number of materials available have caused me to think more precisely and exactly about what I want in the course outline prior to searching for supporting materials. Perhaps this is a maturing step for me as a professor. I would credit OER with providing me with methods to do exactly that.
The text is very comprehensive as far as information is concerned. Most, if not all, key vocabulary and methodologies of risk management are covered in depth and written to a level easily understandable at the undergraduate level. However, the... read more
The text is very comprehensive as far as information is concerned. Most, if not all, key vocabulary and methodologies of risk management are covered in depth and written to a level easily understandable at the undergraduate level. However, the text lacks an index or glossary which would be extremely welcomed. The table of contents and chapter layout support the information contained therein and are organized in a logical format.
The content is very accurate in terminology and concepts. The description of the varieties and concepts of risk are well defined. However, several of the links for attribution and additional readings are broken.
The content is not likely to change very much and has not since the publish date. A couple concepts have changed and could be expanded upon such as terrorism insurance and cybersecurity insurance which became more prevalent since the publication date. The instructor for the course should read this text closely to ensure that this information is covered in additional readings or lecture. The greatest difficulty with timeliness of the text is the inclusion of web links which frequently change and have not been updated.
The book is very clear and easy to read. The text is written to the undergraduate level with vernacular that is appropriate. The terminology is well defined and explanations for key concepts are done through graphics. These graphics are appropriate for the text and explanations and well developed and descriptive.
The book is very consistent in layout and is broken into appropriate chapters with relevant information contained therein. Terminology is well explained, with key words being in bold. The book uses key words as forming the basis for the framework of the text providing some examples, but again through tables and graphics.
The chapters are self contained and could be read individually but still need to be read in a sequential order. Few are self contained that could be extrapolated during lecture. However, with appropriate introductions, the chapters could be assigned individually. The chapters are not lengthy and are appropriate for an undergraduate course.
The book is well organized and flows logically from topic to topic. The key concepts also flow well leading from one to another without my having concern.
I found several interface issues. The PDF version has chapter names in a blue text making it appear these are hyperlinks. If they were intended to be hyperlinks, then they are non functional. As mentioned before, numerous web links are dead.
I found no grammatical errors but my caveat is that I have little concern over grammar in my courses. However, I found nothing glaring.
Nothing struck me as being culturally insensitive, however the text concepts are written to support knowledge of persons with sufficient wealth to afford insurance. It does little to cover risk reduction for persons with limited financial means.
I would use the text in my course with sufficient course development time to identify appropriate links and better descriptions into new insurance products. As I focus on emergency and disaster management, additional information on the use of insurance and limitations after emergencies could be helpful.
The text covers a broad range of areas, especially insurance industries even though it has a weak theoretical foundation part. It would be a good textbook for undergraduate business students. read more
The text covers a broad range of areas, especially insurance industries even though it has a weak theoretical foundation part. It would be a good textbook for undergraduate business students.
Content is accurate.
Content seems up-to-date. And it will not require a significant effort to update.
The text is written in legible and accessible prose.
The text is written in consistent style and with contemporary terminology.
The text consists 23 chapters. Definitely some chapters are impossible to stand alone. However, it would be easy to find a group of chapters that can stand alone as a group and can be a prat of a reorganized textbook. Each chapter starts with its own introduction. It is also helpful for modularity.
Organization of chapters looks great. All the related chapters stick together. And I don't see any problem in structure and flow inside a chapter, either.
I don't see any serious problem in interface.
I don't find any grammatical errors.
The text is not culturally insensitive or offensive in any way. I am rating this text 'low', not because it does a bad job, but because it isn't related. I don't think Cultural issue can be a big problem in this context, because Risk management and insurance are mainly not about interaction between persons. And also it is not easy to include cultural variety in the context.
As I mentioned above, it does't provide a enough theoretical/mathematical foundation of risk, but, it covers pretty wide range of topics in risk management and insurance. Therefore, it can serve for undergraduate business students, without requiring a high quantitative ability.
Table of Contents
- Chapter 1: The Nature of Risk: Losses and Opportunities
- Chapter 2: Risk Measurement and Metrics
- Chapter 3: Risk Attitudes: Expected Utility Theory and Demand for Hedging
- Chapter 4: Evolving Risk Management: Fundamental Tools
- Chapter 5: The Evolution of Risk Management: Enterprise Risk Management
- Chapter 6: The Insurance Solution and Institutions
- Chapter 7: Insurance Operations
- Chapter 8: Insurance Markets and Regulation
- Chapter 9: Fundamental Doctrines Affecting Insurance Contracts
- Chapter 10: Structure and Analysis of Insurance Contracts
- Chapter 11: Property Risk Management
- Chapter 12: The Liability Risk Management
- Chapter 13: Multirisk Management Contracts: Homeowners
- Chapter 14: Multirisk Management Contracts: Auto
- Chapter 15: Multirisk Management Contracts: Business
- Chapter 16: Risks Related to the Job: Workers' Compensation and Unemployment Compensation
- Chapter 17: Life Cycle Financial Risks
- Chapter 18: Social Security
- Chapter 19: Mortality Risk Management: Individual Life Insurance and Group Life Insurance
- Chapter 20: Employment-Based Risk Management (General)
- Chapter 21: Employment-Based and Individual Longevity Risk Management
- Chapter 22: Employment and Individual Health Risk Management
- Chapter 23: Cases in Holistic Risk Management
About the Book
This book is intended for the Risk Management and Insurance course where Risk Management is emphasized.
When we think of large risks, we often think in terms of natural hazards such as hurricanes, earthquakes or tornados. Perhaps man-made disasters come to mind such as the terrorist attacks in the U.S. on September 11, 2001. Typically we have overlooked financial crises, such as the credit crisis of 2008. However, these types of man-made disasters have the potential to devastate the global marketplace. Losses in multiple trillions of dollars and in much human suffering and insecurity are already being totaled, and the global financial markets are collapsing as never before seen.
We can attribute the 2008 collapse to financially risky behavior of a magnitude never before experienced. The 2008 U.S. credit markets were a financial house of cards. A basic lack of risk management (and regulators' inattention or inability to control these overt failures) lay at the heart of the global credit crisis. This crisis started with lack of improperly underwritten mortgages and excessive debt. Companies depend on loans and lines of credit to conduct their routine business. If such credit lines dry up, production slows down and brings the global economy to the brink of deep recession—or even depression. The snowballing effect of this failure to manage the risk associated with providing mortgage loans to unqualified home buyers have been profound, indeed. When the mortgages failed because of greater risk- taking on the Street, the entire house of cards collapsed. Probably no other risk-related event has had, and will continue to have, as profound an impact world wide as this risk management failure.
How was risk in this situation so badly managed? What could firms and individuals have done to protect themselves? How can government measure such risks (beforehand) to regulate and control them? These and other questions come to mind when we contemplate the consequences of this risk management fiasco.
Standard risk management practice would have identified sub-prime mortgages and their bundling into mortgage-backed-securities as high risk. People would have avoided these investments or would have put enough money into reserve to be able to withstand defaults. This did not happen. Accordingly, this book may represent one of the most critical topics of study that the student of the 21st century could ever undertake.
Risk management will be a major focal point of business and societal decision—making in the 21st century. A separate focused field of study, it draws on core knowledge bases from law, engineering, finance, economics, medicine, psychology, accounting, mathematics, statistics and other fields to create a holistic decision-making framework that is sustainable and value- enhancing. This is the subject of this book.
About the Contributors
Etti Baranoff is an associate professor of risk management, insurance, and finance at the School of Business at Virginia Commonwealth University (VCU) in Richmond, Virginia, where she has taught since 1995. She has been in the insurance field for over thirty years. Prior to entering academia, she worked in the insurance industry and as a Texas insurance regulator. She began her insurance career as a pension administrator and market and product research analyst at American Founder’s Life Insurance Company in Austin, Texas, in 1978. In 1982 she began a twelve-year career as a Texas insurance regulator, beginning with actuarial work for the rate promulgation of property/casualty lines of insurance, following with legislative research work on all topics.
Dr. Baranoff has authored or co-authored more than fifty papers relating to risk management and insurance. Her work, which considers issues such as capital structure, detection of potential insolvencies, asset allocation and performance, and market discipline, is all within the context of enterprise risk and enterprise risk management. She has received various honors and recognitions during her career, including five awards given by the International Insurance Society (2008, 2006, 2004, 1996, and 1995). She was recognized as the 2005 Distinguished Scholar by the VCU School of Business and was a seven-time winner of research awards given by the business school. She was also the recipient of the 1990 Spencer Scholarship Award (RIMS) and the 1989 Vestal Lemmon Presidential Scholarship at the University of Texas at Austin.
In addition to her PhD in finance with minors in insurance and statistics from the University of Texas at Austin in 1993 and her BA in economics and statistics from the University of Tel Aviv, Israel, in 1971, Dr. Baranoff also holds the fellow of Life Management Institute designation with distinction.
Patrick L. Brockett holds the Gus S. Wortham Memorial Chair in Risk Management and Insurance in the Department of Information, Risk, and Operations Management at the University of Texas at Austin. He is the director of the risk management program and the director of the Center for Risk Management and Insurance Research and holds a joint appointment as a full professor in the departments of Information, Risk, and Operations Management; Finance; and Mathematics. Prior to becoming the director of the risk management program, he served as the director of the actuarial science program at the University of Texas at Austin. He is the former director of the Center for Cybernetic Studies and is a fellow of the Institute of Risk Management, a fellow of the Institute of Mathematical Statistics, a fellow of the American Statistical Association, a fellow of the Royal Statistical Society, and a fellow of the American Association for the Advancement of Science.
Dr. Brockett has taught and done research in the fields of risk, insurance, and actuarial science for almost thirty years. His research articles have won awards from the American Risk and Insurance Association, the American Statistical Association, the Society of Actuaries, the International Insurance Society, and the Casualty Actuarial Society, as well as from the Faculty of Actuaries of Scotland and Institute of Actuaries in England. He is listed as one of the top ten most published researchers in the world in the seventy-five-year history of the Journal of Risk and Insurance (the premier academic journal in risk management and insurance in the world) in terms of the number of pages published. He was presented with the American Risk and Insurance Association Outstanding Achievement Award, won the Robert I. Mehr Award given by the American Risk and Insurance Association “for that journal article making a ten-year lasting contribution to risk management” and having “withstood the test of time,” and won the Halmsted Prize for the Most Outstanding English Language Publication in Actuarial Science in the World, presented by the Society of Actuaries. He served as editor of the Journal of Risk and Insurance for nine years and in this capacity also became familiar with multiple aspects of insurance, including institutional details, market performance, agent behavior and responsibilities, and standard practice in the insurance industry.
Dr. Brockett has published four books or monographs and over 130 scientific research papers. He regularly teaches classes involving insurance and risk management. He received his PhD in mathematics in 1975 from the University of California at Irvine, California.
Yehuda Kahane is active in both the academic and business areas. He is a professor of insurance and finance, Faculty of Management, Tel Aviv University, and head of the Akirov Institute for Business and the Environment. He founded and served as the dean of the first academic school of insurance in Israel (now a part of Netanya Academic College). At Tel Aviv University he directed the Erhard Insurance Center and the actuarial studies program and coordinated the executive development program. He is a life and nonlife actuary.
Over more than forty years, Dr. Kahane has taught at universities around the globe, including the Wharton School at the University of Pennsylvania, the University of Texas at Austin, the Hebrew University of Jerusalem, the University of Florida, and the University of Toronto, among others. He founded and has directed the Israel CLU program. He has also organized and lectured in hundreds of seminars and conferences.
Dr. Kahane earned a BA in economics and statistics in 1965, an MA in business administration, cum laude, in 1967, and a PhD in finance in 1973, all from the Hebrew University of Jerusalem. He has served as an associate editor of the leading journals on risk and insurance. He has taught courses in technological forecasting (the first teacher of this subject in Israel), finance, insurance, risk management, and actuarial topics. His research focus is on the portfolio implications for insurance, rate making, automobile insurance, natural hazards, pension and life insurance, reserving, and environmental risks.