Employer: How do we know we are doing much better this year than last year?
Risk Manager: What is this year is last year plus or minus this year’s change.
CFO: But change is the only constant, so why do we need to measure it?
To quantify risk management performance, the cost of risk must be measured. The components of Cost of Risk (COR) include 1. insurance premiums, 2. retained losses, 3. risk management department budgets, 4. risk management contract services. Results are compiled to show an average COR cost per $1,000 of revenues.
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