What does Total Cost of Risk (TCOR) include?

Total Cost of Risk (TCOR) encompasses all costs associated with an organization's risk management activities, reflecting a comprehensive view of what an organization spends to fight against, mitigate, or manage risks. This includes not only insurance premiums but also other costs directly tied to risk, such as deductibles, loss control expenses, claims management costs, and any direct losses that may not be covered by insurance.

Additionally, TCOR accounts for indirect costs related to risk, such as loss of productivity, reputational damage, and administrative expenses incurred by the risk management department. A complete understanding of TCOR helps organizations budget appropriately and identify areas where efficiencies can be improved or risks can be better managed. By taking into account all elements associated with risk, organizations can develop more effective risk management strategies and enhance overall financial performance.