Question Tag: Insurance

Approaches to risk management in BOGML – Advice to the board of directors

The following are the risk management approaches that the board of BOGML can adopt to manage the following risks identified in the company:

Risk A

• Description: Low probability but high impact, e.g., pandemics, natural disasters.
• Approach: Risk Transfer or Risk Sharing
• Since this risk has a low likelihood of occurring but can result in severe financial losses, the company should consider transferring this risk or sharing risk. This can be done through the company taking full or partial (i.e. sharing of risk) insurance policies specifically designed for catastrophic events, such as business interruption insurance, pandemic insurance, or property insurance that covers natural disasters. Since the impact will be high when the risk occurs, the company can take insurance to pass on the high impact on the company to the insurance company which has to compensate BOGML in the event that the risk does occur.
• The risk could also be shared through BOGML forming partnerships and collaborating with other OMCs to undertake investment in their oil stations.
• The company should also develop a disaster recovery and business continuity plan to manage potential impacts effectively.

Risk B

• Description: High likelihood but low financial impact, e.g., labor turnover and software downtime due to internet instability.