Importance of Risk Management


The fundamental aim of any economic enterprise, or community activity is to make profit. It matters very little how this “Profit” may be expressed, but there is always the need to protect such profits from the likelihood of an accident occurring. For e.g. oil spillage on a walkway as a result of roadside garages, causes potholes to develop on the tarmac roads. A defected brake on a vehicle makes such a vehicle prone to accident, thus these potholes as a result of oil spillage on the tarmac pose as treats to the profit that would accrue from investment in motor vehicle road transportation.

But these risks can be forestalled by instituting an orderly approach in handling these risks so that they do not threaten our capacity to me returns on our investments. Since many of these dangers or risks are not readily apparent, there is the need for the principal objective of employing “Risk Management” as an effective planning method of ensuring that resources are put in place to recover financial balance and operational effectiveness after a fortuitous loss. Therefore, risk management has become a means of obtaining a short-term cost, for risk stability and long-term risk minimization.

To achieve such an objective, the Risk Manager must select the method of risk treatment, which should result in a net economic advantage to the firm or business enterprise. The first task of the manager is therefore to identity the various risk techniques, how they have been devised and to what level with a specific purpose in mind, and the varying degrees of refinements that these techniques have undergone over the years. Which is why it is equally important also to know that each of these techniques, and their degrees of refinements deal with a particular area of the specific job at hand. But in all of this, the one techniques, and their degrees of refinements deal with a particular area of the specific job at hand. But in all of this, the one technique that is of extreme importance inter-alia, is the physical inspection technique. Though enormously time consuming, yet without inspection the knowledge of potential risk becomes incomplete.

You will recall that every year thousands of people –mostly youths and children – die as a result of people get involved in accidents basically because of ignorance, and their inability to perceive hazards that lead to such accidents. And the cost of these accidents to the community can sometimes be almost impossible to measure, as such measurements would not only consider the cost of actual medication and hospital charges for the injured, but might also encompass the consideration for the potential and actual loss of income to the parents, and other family members who will have to suffer as a consequence, during the hours spent in taking care of these children; not to talk of the eventual loss of resources to the nation itself.

But the fact is that most of our roads encourage speeding with no speed bumps in line with international standards, and less attention is usually paid to the safely of the commuters; hence these roads became as a matter of fact, death traps. Another hazard in addition to the state of our roads, could be the dust that commuters inhale during the dry season on our poorly or sometimes non surfaced roads.

In “Risk Management”, we see two angles of risk management at play which involves the combination of the individual behavior, and that of the corporate world. For instance, the individual might be faced w if he or she decides not to employ protective measures such a paying attention to machinery operational guides, wearing of safety hats and/or safety screens during work. Any of the lapses on the part of the individual employee creates a risk hazard. But from the Company’s view point we see the company responding to exactly the same risks, but for different reasons. For the company its concern is not only with personal injury of employees but the overall cost to the company of any risk materializing. Whatever happens the company will respond in some way, and so company attempts to predetermine what kind of attitude people have to risk. This is very important in the community as well as in the governance of the state.

Where governance may be defined as the exercise of political economic and administrative authority to manage nation’s affairs, the challenges facing all societies is to create a system of governance that promotes supports and sustains human development. Promoting risk management should be a priority in the fight against poverty, corruption and for the emplacement of good governance. Risk should be identified. Analyzed and controlled so that optimal use could be made of the scare resources, through managing our exposures to risk. Government properties. Schools. Colleges and other resources should be protected and maintained. There should be a general duty of care, health, safety and welfare of all employees and the entire citizenry. Government efforts alone cannot remove or minimize the risk posed by society, therefore there is the need to organize awareness drives to educate people on issues affecting our community, particularly in the work place.

I therefore congratulate SLICOM for bringing in innovations for the general good of the people, which is exactly what the Commission should be doing, thus creating the avenue for people lie us to examine critical issues such as risk management, for the betterment of our nation.

Motor Insurance Policy


By Edward Lennix Lisk- Dip. Business Studies, B.S.C. (Hons) Financial Services (Hons 1), Ipam, University of Sierra Leone. Underwriting Department Ritcorp (s.l) Ltd.

The primary function of insurance is to spread the financial lose of its insuring community by compensating the unfortunate few, from the funds built up from the contributions of all members.

Specifically, there are two parties involved in an insurance contract – the insurer and insured or client. Accordingly, any other person who may become linked in some way with a particular insurance contract (e.g. a claimant) is regarded as a third party.

Presently, insurance companies in Sierra Leone are underwriting three (3) types of motor insurance policies or covers namely:

  • Third party policies or cover.
  • This policy covers the insured’s legal liability towards other people arising out of the use of a motor vehicle, the liability for property damage, as well as for death and injury as a result of the said vehicle.

  • Third party, fire and theft
  • In addition to the full third party cover-mentioned in (a) above, this policy includes loss or damage arising from fire or theft only to the insured vehicle.

  • Comprehensive.
  • This implies that every conceivable risk is covered. It is the widest form of cover available, but certain risks such as loss through deterioration or through loss of the use of the vehicle are usually excluded. The perception of many motorist or the insured with regards motor insurance covers are negative – due to the lack of knowledge of insurance or undue expectation of the benefit of motor insurance policies.

    Coming to the issue of motor insurance covers, the penultimate reason for taking and insurance cover by motorists has been to keep them away from the police, failing to acknowledge the fact that motor insurance covers are available so that the insurer could bear the motorists legal responsibilities following genuine claims; although the limit of legal responsibilities by insurers could be small or inadequate as the circumstance might be, the insured are given the option by insurance companies to increase their limit of Le.1,000,000/00 to an appreciable amount with the payment of additional premium so that in an event of a claim the claimant could be adequately compensated.

    Third party bodily injury claims are unlimited but subject to negotiation. The Comprehensive motor insurance policy is most advantages because it provides the widest cover or benefits and therefore most expensive.

    The Mantra for the day that “insurance is waste of money”, and the refusal
    therefore on the part of the general public to accept the imperative role that insurance companies, Brokerage firms, and against, are rendering towards nation building, through their contributions, either economically, socially, and physically, as in providing employment as well as infrastructural development respectively. Many a time, the insured takes insurance covers without initial presuppositions as to what benefit to expect.

    Clearly the ball is in the court of insurance companies and other stakeholders to embark on massive sensitization drives aimed at eradicating the afore-mentioned negative illogical conclusions from the minds of motorists that motor insurance is all about distancing yourself from the police, thereby presenting insurance in its true picture.

    Finally, the presence of easy to obtain technical advice and flexibility in the policy conditions will force changed. Let us all continue to render quality services because quality has no finish line.

Insurance as A Financial Security Institution


Mr. Dauda J.B. Kallon, National Diploma In Insurance, MMCET, Goderich, Marketing Officer RITCORP.

It is but a popular belief that economic activities are skyrocketing at an alarming speed. The world has become a global village encouraging international trade association; such relationships involve huge financial transactions. These transactions attract different modes of transmission from country to country or organization to organization-all over the world.

Today however, there is a great consciousness in the level of which human beings have, mastered the powerful and efficient machine – “computer” so much that there are now possible treats in it use. The use of Internets, websites in business transaction has also poised treats, and there are instances where investors have defrauded, credited, falsified credit cards and codes decoded by fraud stars, all in the name of “419”, the popular fraud name sounded by Nigerians.

Events have long over taken those days when financial guarantee was measured by – The number of arm personnel convoy vehicles. The quality of locks and keys to a safe deposit box. The means of transportation through which such finances or goods are moved from one place to another i.e. air, sea and land.

Internationally, all these means are prone to hazards of different nature, with each having it’s degree of occurrence and severity.
However, when such an unexpected event unfolds, the individual, country industry, firm or an establishment of any nature, stands to suffer in dual folds – psychologically and financial.

PHYCHOLOGICAL EFFECT- no man wants to loose that which he cherishes most. And as business borders around profit maximization on the other hand, a prudent businessman looks forward to seeing his final account indicating a net economic advantage. If his laptop computer gets missing on the day of submitting his final report, he will have a mental problem, which will affect the smooth running of whole office, thus posing a psychological threat.

On the other hand, the missing computer, is a property of the company, and it
needs to be replaced for future operations, therefore a fresh financial undertaken has to be effected. A new computer has to purchased from somewhere within the annual profit which was intended for another purposes; although this can also be the case in other minor event of loss.

Even so, no organization can adequately cater for an unforeseen contingency. Business houses or organizations can forecast future expected profit, if proper accounting and statistical records system are adopted, but no amount of personal savings can adequately compensate for a serious loss situation.

Therefore it is highly recommended that the most reliable means of financial safety in any shape or form becomes insurance. Friends, relatives’ sympathizers can share your sorrow by consoling you, but they cannot accordingly indemnify or compensate you – never. The problem will have to rest squarely on you alone, which may sometimes lead to a point of throwing you out of business.

When all others failed, there is only one friend that can wholeheartedly accept you as Christ accept sinners, and that friend is “insurance”. It takes care of both your psychological and financial burdens in the event of a loss.

It is now apparently obvious that no organization other than insurance has the structural capacity to effectively and accurately handle loss situations. The insurance industry has the capacity and technical expertise to evaluate, analysis, and measure a risk in monetary terms for any future events. Financial institutions should therefore be seen embracing insurance companies for their technical advise, as a way of minimizing cost, and at the same time creating risk managing concept for the benefit of these financial establishments.

In actual fact not all properties of an establishment are to be insured if only there is a risk management structure in place, together with adequate risk handling methods. It is for these reasons that Risk managers classify risk into the following: Risk avoidance, Risk retention/assumption, and Risk transfer – which are in the purview of insurance.

With this knowledge, much financial discipline is instituted; where the insurance companies know exactly the nature of technical advice and the necessary precautionary measures applicable for either prevention or minimization of a loss occurrence. Compliance with such prevention measures will better place managers and staff of an institution in a financially advantageous position.

Insurance is all about financial security -, which cuts across all levels of business transaction regardless of location. In Sierra Leone the industry has a national duty to perform if businesses are to develop. As a nation the government and or every responsible government has fundamental responsibility to the nation that is economic stability, a stabilized economy paves way for total development.

Therefore, business in a stable economy has the potential of growing thereafter making life better.A growth in economy goes side by side with developing country, when business is at a safe developing speed more investors manifest interest in such a country and the more business invested, the better the choice of the consumers and the better the quality of goods produced, which will virtually place the economy and the country on a better footing. These will also improve the standard of the citizens.

The work of the Sierra Leone insurance commission cannot be disassociated from that of governments dream in promoting a viable economic state. The government has a duty to this nation, that is, to move the economy to an appreciable level so as to ensure an economic stability. On the other hand, participatory governance matters most. And as citizens we must be setting up businesses, managing them well, developing them into partnerships, corporate establishments etc., so as to have a say in the running of the economy. If this is so, collaborative effort is therefore required resulting in a tripartite relationship between SLICOM, Government and investors, for a better Sierra Leone.

In this regard, Government creates the enabling environment through the enactment of positive trade policies and bilateral diplomatic relationships.
SLICOM on the other hand, provides a financial treat free society through prudential regulation of the insurance market in Sierra Leone, thereby ensuring financial safety for possible investors at home and abroad. Investors on their side must be bringing businesses that will promote the standards required for a possible and positive economic growth.

Undoubtedly, risk is a natural phenomenon, it strikes when list expected, its outcomes always creates dissatisfaction no matter the degree of severity. Since risk is part of human existence, no man can actually and totally prevent its occurrence. Therefore it pays a lot to employ the services of establishments that actually can to some extent, manage or regularize risk occurrence and probably forecast it possible outcome.

Unfortunately, risk to many people is all about engaging in dangerous activities like test piloting, Lumber jacking, climbing high buildings, bookmaking, car-racing boxing or toying with sophisticated machine etc. yes but there is more to it. Every activity of our lives involves risk, even with the things we enjoy most like eating, drinking talking, smoking, dancing, dating a fiancé or fiancés. Marriage is all about risk, being educated or illiterate is also a risk; so no man can ever escape risk.

What actually matters is the nature of risk and its relation to our reactions when the risk surfaces, and not whether it effects are psychological or financial.
Lets take a quick look then at the hurricanes in the United State of America. It is crystal clear that they do not happen very often. But again it is not the frequency that determines the magnitude of the loss. It only happens in one day or week of a month in a year, but the severity created so much impact that every American stands to loose or feel the catastrophic trauma of these hurricanes.

Back home, the Paterson and Zucchinis (PZ) building fire disaster in 1990 happened in a few hours of the night, but the whole investment was completely set aback. However, with the aid of insurance Trust Corporation (RITCORP), being the Insurer by then there was a complete settlement of the loss.

Companies that are Prudent always reinsure with international reinsurance companies as a sort of risk sharing mechanism, and there is no genuine loss that insurers cannot settle. Readers my advice then is for you to transfer your risk to an insurance company and provide financial guarantee for your investment.

I therefore dove my hat to SLICOM and the Government of Sierra Leone for creating such a timely forum for educating the nation, particularly the investors, in promoting sustainable economic development. I hereby appreciate my opportunity of reaching out to our numerous readers on this all-important issue.

Role of Information Technology

Mr. Sorsor Mara Ritcop Fire Accident & Reinsurance Department

Fundamentally, real computerization depicts a continuous re-evaluation of each and every aspect of a business method with view to adopting the smoother and faster way of going about it each time.

Information Technology governance is an inclusive term, which entails a myriad of parameters visually: Information systems, Technology and Communications, All Concerned stakeholders. (i.e. Directors, Executive Management and Senior Management, Auditors, Information Technology Suppliers, Process Owners and users,) Business, Legal, or other issues.

Information Technology was hitherto considered an enabler of an organization’s strategy. Nowadays it is considered an integral component of the strategies of organization.

The Chief Executive Officers today all agree that strategic alignment between Information Technology and entrepreneurial objective is a critical success factor. In order to achieve these critical successes, Information Technology governance aims at effectively deploying confidential reliable information and applied technology.

Generally the tools of Information Technology governance measure a consortium of variable including: Ability to innovate, Internal operation of processes, customer satisfaction of user and the Traditional financial evaluation.

In evaluating the above-mentioned goals, three layered structures are applied visually: Mission, strategies and measures. A good example of a technique that uses the above is the Standard Balance Information Technology scoreboard.

Of note, the Reinsurance Arrangement involves the signing of treaties that is usually done at the beginning of a financial year; and these are usually made with reinsurance companies.

Underwriting hinges on capturing of proposals alongside their analysis. The proposals could be accepted (or repudiated) with the eventual processing of policy documents.
The Debit Notes are produced and premiums are accordingly collected.
Practically, policies, which are renewable, are renewed to run for another period.
Analysis denotes the determination and recognition of compulsory cessions vis-à-vis analysis of individual policy Sum Insured/Assured.

Cession Sheet is synonymous with production of a report for each class that depicts details of all polices in the class. Cession Bordereaux refers to a document showing the necessary information regarding a risk being ceded to the treaty for example: Cession name of Insured, period of issue, rate, Sum Insured, Premium, legal cession (if any), amount ceded to treaty and facultative share in case of excess.

Apportionment reflects that re-insurable amounts are apportioned to the various reinsurers according to prearranged proportions. The slips are sent to the reinsurance companies periodically for confirmation. Amongst the Reinsurance Reports produced are schedules, Account Rendition, Facultative Slips, Apportionment Facing Sheets, Bordereaux and Periodical Accounts, Confirmation Letters and Annual Accounts.

The foregoing reports are the most significant reasons for automation since they can be produced faster with computers and more correctly. Besides, they can be viewed without printing and even stored for printing on a later date. In addition they can be emailed to another location as well as published on the Internet.