Risk management is an emerging concept in modern business. It is the process that identifies loss exposures faced by the organization and selects the most appropriate techniques for treating such exposures. In the past, risk management was limited which includes property risk, liability risk, and personal risk. Now, Risk management has greater scope in modern business

Risk management is the process of identification and analysis of uncertainty in investment decision-making. Generally, risk management occurs anytime to quantify the losses in an investment. Then, it takes the appropriate action given to their investment objectives and risk tolerance.

According to J. L. Papps and E. F. Brigham, "We define any decision whose outcome is less than certain as being risk, and we say that such decisions are subjects to risk and uncertainty."

According to George E. Rejda, "Risk management is a process that identifies loss exposures faced by an organization and selects the most appropriate technique for treating such expenses."

In conclusion, risk management is the process of managing the risk of uncertainty and unfavorable events. It helps to reduce the losses due to the uncertainty and unfavorable situation.

Human life and properties are always exposed to risk and uncertainties. Such risks and uncertainties may cause great loss to human beings. Risk cannot be completely eliminated but there is a device to cover the loss of the financial risk, which is known as insurance. In this modern generation, insurance had become an essential tool to manage the risks of an individuals the corporation.

Insurance can be defined as the act of providing indemnity or coverage against harm, as per the contract. Insurance is a legal contract that protects people from the financial losses. It protects from the risk of person and business. Insurance is an economic institution that allows the transfer of financial risk from an individual to a group by the means of a two-party contract. It is a contract between the insurer and insured in which the insurer promises to pay the financial loss to the insured. Such contract is known as an insurance policy. 

According to M.N. Mishra, "Insurance is a cooperative device to spread the loss caused by a particular risk over a number of persons, who are exposed to it who agree to insure themselves against the risk."

According to John H. Magee, "Insurance has been defined as a plan by which a large number of people associate themselves and to the shoulders of all, the risk that attached to individuals."

Likewise, Insurance is a legal contract in which an individual receives financial protection against losses from an insurance company. In the modern age, insurance has become an essential tool to manage the risks of an individual and the corporations.

 

The insurance provides a safeguard against uncertainties and risk.  It is important for individuals as well as for institutions due to the following reasons.

1. Insurance provides security

The Businessman should not have worry about the losses or damages at the time of loss in their property if they are duly insured. Insurance provides financial protection to business assets and properties against the risk of theft, fire accidents or any other natural calamities. Insurance keeps the person free from tension, fear and worries of various risks.

2. Insurance reduces business risk or losses

In Business, commerce and industry, huge properties are employed. The property may be turned into ashes due to the slight negligence. A person may not be sure of his life and health. It is impossible to eliminate risk and uncertainty completely. Insurance is a cooperative effort of sharing risk. Thus, the impact of risk can be reduced through the distribution of risk.

3. Insurance provides mental peace

Insurance provides mental peace to the insured. It removes tension, fear, and anxiety associated with risks and uncertainties. An individual can devote himself to achieve efficiency in economic activities due to the paceful state of mind.

4. Insurance maintains your family’s standard of living

Insurance provides financial protection against unexpected risk. Due to the financial protection of life and property, insurance avoids the unfortunate financial crisis of an individual and his family. The insured helps the individual to maintain his standard of living even in old age. 

5. Generates financial resources

Insurance generates funds by collecting the premium. The funds are invested in government securities and stock. These funds are gainfully employed in the industrial development of a country for generating more funds. It can be utilized for the economic development of the country. Employment opportunities are increased by big investments that lead to capital formation.

6. Life insurance encourages savings

Insured should pay the amount of premium regularly. It develops the habit of saving. The deposited premium cannot be withdrawn like a bank deposit. Life insurance is the best medium of saving and investment. It is a good means to make provision for retirement age. 

7. Promotes foreign trade:

Foreign trade is relatively riskier than domestic trade. There ae different types of risk in transit like marine perils, explosion, terrorism etc. Insurance provides protection and covers the loss of such risks and thus promotes foreign trade.

8. Medical support

A medical insurance is considered as an essential element in managing risk in health. Anyone can be a victim of critical illness unexpectedly. Rising medical expense is of great concern. Medical Insurance is one of the insurance policies that cater for differently.

9. Reduce inflation 

Premium collected by the insurance company reduces the supply of money. On the other hand, the collected fund can be invested in productive purpose. Such investment helps in increasing production and decreasing the impact of inflation in the country.

10. Employment opportunities

Insurance companies need different types of personnel with distinct skills, experiences, and academic qualifications. They provide employment opportunities to the people of the country. So, hundreds of people are engaged in insurance business.

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Human life and properties are always exposed to risk and uncertainties. Such risks and uncertainties may cause great loss to human beings. Risk cannot be completely eliminated but there is a device to cover the loss of the financial risk, which is known as insurance. In this modern generation, insurance had become an essential tool to manage the risks of an individuals the corporation.

Insurance can be defined as the act of providing indemnity or coverage against harm, as per the contract. Insurance is a legal contract that protects people from the financial losses. It protects from the risk of person and business. Insurance is an economic institution that allows the transfer of financial risk from an individual to a group by the means of a two-party contract. It is a contract between the insurer and insured in which the insurer promises to pay the financial loss to the insured. Such contract is known as an insurance policy. 

According to M.N. Mishra, "Insurance is a cooperative device to spread the loss caused by a particular risk over a number of persons, who are exposed to it who agree to insure themselves against the risk."

According to John H. Magee, "Insurance has been defined as a plan by which a large number of people associate themselves and to the shoulders of all, the risk that attached to individuals."

Likewise, Insurance is a legal contract in which an individual receives financial protection against losses from an insurance company. In the modern age, insurance has become an essential tool to manage the risks of an individual and the corporations.

Any six importance of insurance are as follows:

1. Insurance provides security

The Businessman should not have worry about the losses or damages at the time of loss in their property if they are duly insured. Insurance provides financial protection to business assets and properties against the risk of theft, fire accidents or any other natural calamities. Insurance keeps the person free from tension, fear and worries of various risks.

2. Insurance reduces business risk or losses

In Business, commerce and industry, huge properties are employed. The property may be turned into ashes due to the slight negligence. A person may not be sure of his life and health. It is impossible to eliminate risk and uncertainty completely. Insurance is a cooperative effort of sharing risk. Thus, the impact of risk can be reduced through the distribution of risk.

3. Insurance provides mental peace

Insurance provides mental peace to the insured. It removes tension, fear, and anxiety associated with risks and uncertainties. An individual can devote himself to achieve efficiency in economic activities due to the paceful state of mind.

4. Insurance maintains your family’s standard of living

Insurance provides financial protection against unexpected risk. Due to the financial protection of life and property, insurance avoids the unfortunate financial crisis of an individual and his family. The insured helps the individual to maintain his standard of living even in old age. 

5. Generates financial resources

Insurance generates funds by collecting the premium. The funds are invested in government securities and stock. These funds are gainfully employed in the industrial development of a country for generating more funds. It can be utilized for the economic development of the country. Employment opportunities are increased by big investments that lead to capital formation.

6. Life insurance encourages savings

Insured should pay the amount of premium regularly. It develops the habit of saving. The deposited premium cannot be withdrawn like a bank deposit. Life insurance is the best medium of saving and investment. It is a good means to make provision for retirement age.