The probability and severity of possible losses play an important part in the structuring of a risk-financing programme.
Selection of risk control and risk financing measures will have primarily two steps: Forecasting the effects of available risk management techniques, Defining and applying criteria to measure contribution of the technique
The selection criteria of risk control and risk financing technique should also take into consideration: effectiveness, feasibility, cost-effectiveness, financial objectives and other objectives like stability of earnings over time, maximising earnings in any short time period etc.
Implementing the selected techniques involves : Technical decisions by the risk manager or his team; and Managerial decisions by plant managers or line managers.
Elements of good risk management and internal control are: Risk Awarness, Fundamental i.e. Financial Control, Consultation Throughout Company, Control Strategies on Continued Basis, Awareness of Objectives, Early Warning Mechanisms & Quick Response, Reliable Business Information, Emphasis on Changing Behaviour
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