Total Cost of Risk Analysis

While a risk management program can be an effective method for controlling risk, the resources used by the program may not be addressing all the risks faced by the business. One way to discover all of the risks facing your business—including the ones
that might not be seen, considered or addressed in your risk management program—is to examine the total cost of risk (TCOR).

TCOR is the total cost of the items that businesses are responsible for, such as insurance premiums, retained losses in the form of deductibles and uninsured losses, indirect costs of claims and administrative costs, and other factors that can include the
following:

• Transaction costs
• Loss of reputation
• Loss of market share
• Overtime
• Additional training
• Product loss
• Production decrease
• Claims reporting and investigation
• Fines

Over time, an idea of an organization’s TCOR can provide a form of measurement for assessing how its risk-related costs are changing, relative to the overall growth rate of the business.