State of Nebraska
Administrative Services – State Accounting Division
Risk Assessment Roadmap Toolkit
Risk
Identification and Evaluation
Loss Exposure:
Possibility of financial loss as the result of a particular peril striking a
thing of value.
Three Components of a Loss Exposure: Type of Value, Peril, Potential Financial Consequences
ü People
ü Property
(including vehicles)
ü Freedom
from Liability
ü Revenue
ü Compliance
2.
The peril that causes the loss.
ü
Natural Perils
– Forces of Nature; no human intervention.
Cave-in |
Ice |
Temperature extremes |
Collapse |
Land or mudslide |
Tides |
Drought |
Lightning |
Tidal waves |
Earthquake |
Meteors |
Uncontrollable vegetation |
Evaporation |
Mildew |
Vermin |
Erosion |
Mold |
Volcanic eruption |
Fire of natural origin |
Perils of the air (icing, clear-air turbulence) |
Water |
Flood |
Perils of the sea (icebergs, waves, sandbars) |
Weeds |
Hail |
Rot |
Wind (tornado, hurricane, typhoon) |
Humidity extremes |
Rust |
|
ü
Human Perils
– Actions of one individual or a small group.
Arson |
Fire/Smoke of human origin |
Shrinkage |
Chemical leakage |
Human error |
Sonic boom |
Industrial contamination |
Labor union strikes (direct effects) |
Terrorism |
Discrimination |
Molten materials |
Theft, forgery, fraud |
Confiscation |
Pollution (smoke, smog, water, noise) |
Toppling of high-piled objects |
Electrical overload |
Power outage |
Vandalism, malicious mischief |
Embezzlement |
Riot |
Vibration |
Explosion of human origin |
Sabotage |
Water hammer |
ü
Economic Perils
– Actions of large groups of people who act independently responding to
particular conditions.
Changes in consumer tastes |
Inflation |
Strike (consequences) |
Currency fluctuations |
Obsolescence |
Technological advances |
Recession |
Stock market decline |
War |
3. The
extent of the potential financial consequences.
ü Some
of the valuation standards that are used to assess financial
consequences of property losses include:
Accounting (book) value
– The price paid to acquire the asset, less accumulated depreciation. |
Actual cash value
– Current replacement cost, reduced by true physical depreciation or
obsolescence. Actual cash value recognizes the percentage of an item’s useful
economic life that has been expended. This can be applied to either real or
personal property. |
Economic value
– A method used to determine a building’s value, which is based on the
structure’s earnings potential, as opposed to its depreciated or replacement
value. |
Functional replacement cost –
Cost to acquire a replacement that, while not identical to the property being
replaced, will perform the same function with equal efficiency. |
Historical cost –
The price paid to acquire the asset. |
Market value
– Value of real or personal property based on the price a willing buyer would
pay for the property. |
Replacement cost
– Cost to replace property, with like kind and quality, at its current price
without a deduction for depreciation. |
Reproduction cost
– Cost of duplicating an item of real or personal property exactly by using
identical materials, artistry, and other expertise comparable to those that
were used in the original. |
Tax-appraised value
– The value of real or personal property based on the valuation established
by a government tax assessor. |
ü Property
Definitions:
Real property: The
rough legal equivalent of the more common term “real estate”, meaning land
and things of value permanently attached to it (buildings, other structures,
and things growing on the land). |
Personal property:
All property other than real property. Personal property can be classified as
either tangible or intangible. |
|
·
Intangible property are
assets that have no physical substance. These include, but are not limited
to:
|
Methods of Identifying Loss Exposures:
·
Previous contracts of similar type and
their outcomes.
·
Standardized surveys/questionnaires.
·
Financial statements.
·
Records and files.
·
Loss reports/claims.
·
Flowcharts.
·
Personal inspections.
·
Experts.
Rev 02/08