Which components comprise Total Cost of Risk (TCOR)?

Which components comprise Total Cost of Risk (TCOR)?

• A. Employee benefits and payroll taxes
• B. Insurance costs, retained losses, risk management department costs, outside service costs, and measurable indirect costs
• C. Marketing costs and travel expenses
• D. Depreciation and interest expenses

Answer: (B)

Total Cost of Risk is the sum of every cost tied to creating, owning, and financing risk in an organization. It goes beyond insurance premiums to include losses you retain, the resources dedicated to managing risk, external services you hire, and costs that can be measured even if they aren’t billed as premiums. The best answer captures all these pieces: insurance costs (premiums and related claim handling), retained losses (self-insured losses and deductibles), the costs of the risk management department, outside service costs (consultants, brokers, third-party administrators), and measurable indirect costs (time and productivity lost or overhead associated with risk activities that can be quantified). Other choices pull in expenses that aren’t specific to risk management—employee benefits and payroll taxes are general HR costs, marketing and travel aren’t risk-related, and depreciation and interest are financing or asset costs, not part of the risk management cost envelope.

Total Cost of Risk is the sum of every cost tied to creating, owning, and financing risk in an organization. It goes beyond insurance premiums to include losses you retain, the resources dedicated to managing risk, external services you hire, and costs that can be measured even if they aren’t billed as premiums. The best answer captures all these pieces: insurance costs (premiums and related claim handling), retained losses (self-insured losses and deductibles), the costs of the risk management department, outside service costs (consultants, brokers, third-party administrators), and measurable indirect costs (time and productivity lost or overhead associated with risk activities that can be quantified). Other choices pull in expenses that aren’t specific to risk management—employee benefits and payroll taxes are general HR costs, marketing and travel aren’t risk-related, and depreciation and interest are financing or asset costs, not part of the risk management cost envelope.