Ten Critical Steps for Risk Managers Essay Example | Topics and Well Written Essays - 750 words

Ten Critical Steps for Risk Managers - Essay Example There are mainly 10 major types of political risks, such as Nationalization, expropriation, confiscation, deprivation, contract frustration, currency inconvertibility, trade disruptions, unfair financial guarantee calling, devaluation and several disasters like strikes, war, civil commotion, terrorism and communal riot. Between 2008 and 2011, the issuance of PRI has increased due to volatile political condition of several countries. US achieved government backed terrorism insurance scheme (Miga, 2012). These steps will effectively guide the risk managers to buy political risk insurance. Selection of underwriter or broker is important. Brokers or underwriters are the first contact line. Therefore, it is important for the managers to undertake effective selection process. It is true that there are several underwriters who can share the views about political risk but only few of them can perform adequately in the limited and critical insurance market. Next step is service requirement. I t is an effective part of the selection process. The managers should know what services are required for exports. Moreover, they should try to protect their valuable assets like filing of applications, financing, exposure review, contract review, political risk intelligence, claims handling and loss of control. Fees and commissions should also be effectively examined. The risk managers should try to combine several political risk exposures under a single policy. Broker prefers several important package policies as these are typically more predictable and stable. Effective communication among employees, managers, top management is an important work culture of the organizations. The risk managers should organize an in-house seminar to inform the employees about possible risks and educate them to prevent those risks. Managers should establish a formal and simple communication structure including weekly status and updated reports. They should appoint effective local and familiar coordin ators to publicize operating plan and subject area. Contract review is important for the risk managers. They should conduct a thorough review process including review and analysis of terms of payment and sale, contract and other important documents associated with the exposure. It will help the managers to assure appropriate coverage is obtained. Political risk intelligence is another important step. It is an important part of brokerage service. The qualified facilities will help the managers to assist in the support, information and updated intelligence area. In addition to the 10 Political risk coverage areas, the managers should understand about terms, conditions and rates. These will help the risk managers to address co-insurance, waiting period, deductibility, exclusions, warranties, rescheduling, protection of profits and business interruption. Majority of the political risk coverage does not include export credit. Export credit insurance is an effective sales tool as banks ar e more appropriate to grant export financing. Loss of control is another critical step. Loss of control measure helps the risk managers to minimize the loss. It can include the contract analysis to protect the organization interests in the future (Fita, 2007). The organization’s interest can be protected through favorable treatment security. Last step is claims procedures. Before the occurrence of loss, a written documentation procedure should be developed. It will help to address who is handling the