What is the term for all costs associated with managing pure risk?

The correct answer is the term that encompasses all costs associated with managing pure risk—this includes various expenses that an organization incurs to identify, assess, and prioritize risks, as well as the resources allocated for mitigating those risks. This broad definition explains why this term is widely used in risk management discussions.

Cost of risk refers not only to the expenses related to purchasing insurance but also includes loss control expenses, risk retention costs, and any other operational costs tied to risk management strategies. This comprehensive view ensures that organizations can fully understand the financial implications of the risks they face and take appropriate measures to manage them effectively.

The other terms do not encompass the full scope of costs related to managing pure risk. For example, insurance premium specifically refers to the cost of purchasing insurance coverage, which is just one aspect of the overall cost of risk. Expense of insurance usually focuses on administrative costs and overhead related to insurance policies, while risk management fees can imply costs associated with hiring consultants or brokers without capturing all elements of risk management.