the challenge james r. jones mba, cpcu, ais, arm, aic director of the katie school of insurance and...
TRANSCRIPT
The
CHALLENGE
JAMES R. JONESMBA, CPCU, AIS, ARM, AIC
Director of the Katie School of Insurance and Financial Services
in the College of Business at Illinois State University
NAT POPE PhD, CPCU, ARM, ChFC
Assistant professor of risk and insurance in the College of Business at Illinois State
University
Presenters
The
CHALLENGE
RISK MANAGEMENTREDBIRDCHALLENGE
Developed by
KATIE SCHOOLThe
of Insurance and Financial Services
Winner of the 2007 Strickler Innovation in Instruction Award
The
The
CHALLENGE
Pedagogical Underpinnings of the Challenge
• Experiential to foster motivation, relevance and intellectual engagement
• Iterative to allow for repeated interaction with the content and required skills
• Deductive to encourage intellectual ownership over learning
The
CHALLENGE
How the
is played
RISK MANAGEMENT
REDBIRDCHALLENGE
The
CHALLENGE
The Basics
• Corporate Model• Competitive Marketplace• Student-teams assume the roles of
chief risk officers• Team-goal is to mitigate the negative
effects of potential losses while generating revenues
• Success is defined by the creation of owner equity
The
CHALLENGE
S M T W T F S
The Competition
Q1 Q2 Q3 Q4
The
CHALLENGE
The Task Presented to the Teams
• It is each team’s responsibility to assess the nature of the risk their corporation faces for each quarter and implement the appropriate risk management strategies
• Environmental risk is defined by two parameters: loss frequency and loss severity
• The Matrix guides them in making rational decisions
The
CHALLENGE
Q1 Frequency Distribution
0%
20%
40%
60%
80%
100%
0 1 2 3 4
Number of Occurrences
Pro
babi
lity
Q1 Severity Distribution
0%
20%
40%
60%
80%
100%
$200 $500 $1,000 $10,000
Loss Value
Pro
babi
lity
Q2 Frequency Distribution
0%
20%
40%
60%
80%
100%
0 1 2 3 4
Number of Occurrences
Pro
babi
lity
Q2 Severity Distribution
0%
20%
40%
60%
80%
100%
$200 $500 $1,000 $10,000
Loss Value
Pro
babi
lity
Q3 Frequency Distribution
0%
20%
40%
60%
80%
100%
0 1 2 3 4
Number of Occurrences
Pro
babi
lity
Q3 Severity Distribution
0%
20%
40%
60%
80%
100%
$200 $500 $1,000 $10,000
Loss Value
Pro
babi
lity
Q4 Frequency Distribution
0%
20%
40%
60%
80%
100%
0 1 2 3 4
Number of Occurrences
Pro
babi
lity
Q4 Severity Distribution
0%
20%
40%
60%
80%
100%
$200 $500 $1,000 $10,000
Loss Value
Pro
babi
lity
The
CHALLENGE
The MatrixThe Risk Management
Matrix
High Frequency
Low Frequency
Low Severity High Severity
Retain Transfer - Apply Loss Reduction
Retain - Apply Loss Prevention
Q1
Q2
Q3Retain
Avoid
Transfer - Apply Loss Reduction
Retain - Apply Loss Prevention
Q4
The
CHALLENGE
First Quarter Results
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
First Quarter Second Quarter Third Quarter Fourth Quarter
Cor
por
ate
Eq
uit
y
Team Won
Team Awesome
Team JEM
KTB, Inc.
LBC, Inc.
JERC Enterprise
Second Quarter Results
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
First Quarter Second Quarter Third Quarter Fourth Quarter
Cor
por
ate
Eq
uit
y
Team Won
Team Awesome
Team JEM
KTB, Inc.
LBC, Inc.
JERC Enterprise
Third Quarter Results
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
First Quarter Second Quarter Third Quarter Fourth Quarter
Cor
por
ate
Eq
uit
y
Team Won
Team Awesome
Team JEM
KTB, Inc.
LBC, Inc.
JERC Enterprise
Fourth Quarter Results
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
First Quarter Second Quarter Third Quarter Fourth Quarter
Cor
por
ate
Eq
uit
y
Team Won
Team Awesome
Team JEM
KTB, Inc.
LBC, Inc.
JERC Enterprise
Changes in corporate equity are a function of three factors: in-flow of revenue, out-flow of expenses and the impact of hazard risks on
the company’s operations
The
CHALLENGE
Games within the Game
The
CHALLENGE
RISK MANAGEMENTREDBIRDCHALLENGE
The