Definition

A maximum limit on the amount an insurer will pay for a liability claim. It sets a clear boundary for potential losses, keeping costs predictable.

What to consider

  • Identify and quantify all potential risks.
  • Review both internal and external factors.
  • Update risk analyses periodically.

Real world scenarios

  • A company conducted a risk analysis to identify potential operational hazards before launching a new product.
  • An entrepreneur performed a risk analysis to decide whether to enter a volatile market.
  • A small business reviewed its risk analysis report to implement better safety measures.

Related terms

Insurance & Financial Protection