Cost Of Risk

The three types of cost of risk are:

  • The lives, property, income or other things of valued that are damaged or destroyed by accidents (actual losses),
  • The loss of potential profits or benefits that could have been gained either by the ownership of assets or participation in activities that were avoided as deemed too risky (lost opportunities), and
  • The resources that have been spent to manage accidental losses that could have been otherwise used.


When Risk Management is used in an organization there are benefits in the reduction of the first two types of cost of risk. The third type is the cost of Risk Management. When you put together a Risk Management program your goal is to minimize all three of types of cost and help the organization achieve its objective.

Talk to your broker, agent or accountant about your Risk Management practices.