IDEAL METHOD FOR HANDLING RISK


IDEAL METHOD FOR HANDLING RISK
Loss control-Ideal method for handling risk
From the viewpoint of society, loss control is the ideal method for handling risk. This really is true for just two reasons.
First, the indirect costs of losses might be large, and in a few instances, they are able to easily exceed the direct costs. As an example, a worker might be injured on the job. As well as being responsible for the worker's medical expenses and a certain percentage of earnings (direct costs), the firm could also incur sizeable indirect costs: a machine might be damaged and must be repaired; the assembly line may have to be shut down; costs are incurred in training a new worker to restore the injured worker; and an agreement might be cancelled because goods aren't shipped on time. By avoiding the loss from occurring, both indirect costs and direct costs are reduced.
Second, the social costs of losses must also be considered. As an example, assume that the worker in the preceding example dies from the accident. Substantial social costs are incurred because of the death.
Society is deprived forever of the products and services that the deceased worker might have produced. The worker's family loses its share of the worker's earnings and may experience considerable grief and financial insecurity. And the worker may personally experience great pain and suffering before he or she finally dies.
Simply speaking, these social costs can be reduced through a highly effective loss control programme




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