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Total Cost of Risk

Total Cost of Risk

Do you know and understand the corporate cost of risk and its constituent parts?

Risk costs do not only consist of insurance premium and claims in deductibles, but contain often hidden cost such as:

  • HR cost
  • Loss adjustment cost
  • Loss prevention, mitigation cost
  • Brokerage and other fees
  • Tax
  • Capital cost

Generally risk cost can be divided into 3 main categories:

  • Cost of self retention
  • Cost of risk transfer
  • Cost of risk management

Aon can support you with an assessment of Total Cost of Risk in a model in order to understand them in whole and its compositions. The transparency regarding the total cost of risk can help risk managers to draw conclusions, help in decisions, and improve risk management strategy again to influence TCOR on long term basis to systematically reduce cost. Also the model allows determining interdependencies between the cost categories and therefore demonstrating added value of risk management better.

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