Risk Financing Section 6 CISR

risk financing

The acquisition of internal and external funds to pay losses at the most favorable cost

retention

internal funds used to pay losses

transfer financial responsibility

external funds used to pay losses

insurance

promise of compensation for specified losses in exchange for payment of premium

budgeted retention

portion of expected losses the organization is wiling and able to retain (loss forecasting)

tolerance corridor

marginal retention beyond the budgeted retention an organization may also choose to retain all or part (within level of the budget; want to retain it)

retention/transfer diagram

graphic depiction of an organization's financial ability and risk appetite

risk financing options

retention, transfer financial responsibility, & insurance

optimal

broadly as the best

the optimal cost

most satisfactory, or most desirable

risk financing plans

guaranteed cost (low risk), dividend, deductible, retrospective, self insured (high risk)