Introduction

Many risk practitioners will be apprehensive about adopting and using the universalistic model of risk. Questions will arise about the model's validity: Can we use this model in our risk management discipline? Will we be sacrificing any of our own risk management tenets by using this model? Does the model replace some of the risk techniques used in our brand of risk management?

Ultimately, risk practitioners will want to be assured about the following: could a particular school of risk management accept the universalistic model without compromising their own principles?

The following section evaluates the new model in the light of existing tenets of risk and risk management. In order to illustrate that the universalistic model can be used by all sections of risk management, a systematic dissection of the new model against the tenets of each school of thought on risk will be carried out. Whereas Chapter 4 provided an explanation of each school of risk management from the viewpoint of existing processes, this chapter offers an analysis of each school in the light of the new model's 13 precepts.

Comparison of pure risk tenets and the universalistic model of risk's precepts

Reward

The pure risk school of thought assumes that economic activity, and the motivations that underlie it, is taking place normally. The primary purpose of pure risk management, however, is not to manage risk for the furtherance of gain, but rather to prevent the loss of one's existing assets and rewards (e.g. gross profit). The deliberate taking of risk by an individual or a group is not generally covered by pure risk principles other than as deviant behaviour from expected norms. Far more attention is given to the risk of losing the benefits derived from existing assets.

The pure risk school of thought does not fully accept the concept of reward as proposed in the new model, but the concept is implied or assumed. This school does, however, contribute the important idea of managing potential negative outcomes to benefits derived from existing assets. The precept of reward is not in conflict with the tenets of pure risk.