University of Minnesota - UMN Executive Leadership Insights
Alternative Risk Transfer
Book

Alternative Risk Transfer

Integrated Risk Management through Insurance, Reinsurance and the Capital Markets

Erik Banks
Wiley, 2004
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Editorial Rating

8

Qualities

  • Innovative
  • Applicable

Recommendation

In this excellent introduction to risk management, author Erik Banks offers a lucid, clearly written and well-organized overview. He tells readers what risk management is, why it is necessary, how it works and how companies can carry it out most prudently and cost-effectively. He manages to convey the essential information about insurance and reinsurance, the use of capital markets and derivatives, and the application of enterprise risk management concisely. This is a remarkable achievement. Most books on insurance bog down in jargon and details, while most books on derivatives are unnecessarily complicated and dense. This one – offered by the Wiley Finance Series – is neither. Although not exactly beach reading, it’s about as accessible as any book on this subject could possibly be. getAbstract recommends it highly to executives and investors.

Summary

Risk Management Survey

Risk management is a professional discipline with a long history and a well-developed set of tested practices and procedures. Traditional approaches to risk management include control, financing and loss reduction via the derivatives and insurance market. The alternative risk transfer (ART) market recently has offered a new set of solutions. Understanding the relative advantages of traditional or ART markets requires reviewing the nature of risk and the dimensions of risk management. Risk is uncertainty about the future; corporations are most concerned about the uncertainty of financial gains and losses.

Generally, peril and hazard are, synonyms for risk, but risk management defines peril as a factor that will cause a risk, while a hazard is something that can create or worsen a peril.

Industry definitions of other terms include:

  • Operating risk – The risk that arises from ordinary (non-financial) operations.
  • Financial risk – The risk that arises from financial operations.
  • Pure risk – A risk of loss with no possible upside.
  • Speculative risk – A risk that offers not only possible...

About the Author

Erik Banks has held senior risk management positions at several global financial institutions and has written various books on risk management, emerging markets, derivatives, merchant banking and electronic finance.

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