Statistics and Risk
Management
Risk Management Strategies
Performance Objective:
After completing this lesson, the student will understand the basic concepts of
risk and management strategies for reducing risk.
Approximate Time:
When taught as written, this lesson should take 4-5 days to complete.
Specific Objectives:
 The student will discuss the root causes of risk.
 The student will understand where to look for potential risk.
 The student will review and apply some basic fundamental techniques to
alleviate potential risks.
This lesson corresponds with Unit 2 of the Statistics and Risk
Management Scope and Sequence. Copyright © Texas Education Agency, 2012. All rights reserved. 1 TEKS Correlations:
This lesson, as published, correlates to the following
TEKS for Regression. Any changes/alterations to
the activities may result in the elimination of any or
all of the TEKS listed.
130.169 (g)(1)(C)
(1) The student uses career planning concepts, tools, and strategies to
explore a career in the area of risk management. The student is expected
to:
(A) compare and contrast the fundamentals of risk management,
including the nature and benefits of risk management;
(B) discuss the role of ethics and responsibility in risk management;
InterdisciplinaryTEKS:
English:
110.31 (C) (21) (B)
… organize information gathered from multiple sources to create a
variety of graphics and forms (e.g., notes, learning logs)…
110.31 (C) (22) (B)
…evaluate the relevance of information to the topic and determine the
reliability, validity, and accuracy of sources (including Internet sources)
by examining their authority and objectivity…
110.31 (C) (23) (C)
… use graphics and illustrations to help explain concepts where
appropriate…
Copyright © Texas Education Agency, 2012. All rights reserved. 2 110.31 (C) (23) (D)
… use a variety of evaluative tools (e.g., self-made
rubrics, peer reviews, teacher and expert evaluations)
to examine the quality of the research…
Math:
111.36 (C) (4) (A)
… compare theoretical and empirical probability;
111.37. (C) (3) (B)
… use probabilities to make and justify decisions about risks in everyday
life
Occupational Correlation
(O*Net - http://www.onetonline.org/)
Marketing Managers 11-2021.00
Similar Job Titles: Business Development Manager, Account Supervisor,
Business Development Director, Commercial Lines Manager
Tasks:



Formulate, direct and coordinate marketing activities and policies to
promote products and services, working with advertising and promotion
managers.
Identify, develop, or evaluate marketing strategy, based on knowledge of
establishment objectives, market characteristics, and cost and markup
factors.
Direct the hiring, training, or performance evaluations of marketing or
sales staff and oversee their daily activities.
(Soft) Skills:
Active Listening; Critical Thinking; Persuasion; Social Perceptiveness
Copyright © Texas Education Agency, 2012. All rights reserved. 3 Instructional Aids:
1. Display for presentation, websites for
assignments and class discussion
2. Assignment Worksheets
3. Supporting Spreadsheets
Materials Needed:
1. Printer paper
2. Assignments and website information ready to distribute to
students.
Student projects will be displayed to increase interest in Statistics
Equipment Needed:
1. Computer with presentation and Internet Access
2. Computers for Students to Conduct Research and Collect Data
for Projects
Copyright © Texas Education Agency, 2012. All rights reserved. 4 References:
Managing Risk
This article by Dr. Geoff Benson of North Carolina State University breaks down
risk management from an agricultural perspective. The article provides an indepth look at sources of risk, setting risk management priorities, risk
management strategies, implementing strategies, and controlling risk using
agricultural based examples that can be applied to other business industries.
http://www.agecon.ncsu.edu/VIRTUAL_LIBRARY/ECONOMIST/septoctec99.pdf
Business Risks
Managing Risk, Crisis Management and Business Continuity Planning,
IT Risk Management, and Assess and Minimize Your IT Risks.
http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1079050214
Identifying Strategies and Tactics for Reducing Risks
This article on risk management will help students answer the following
questions. What is risk reduction? What are protective factors? What is the
difference between strategies and tactics? Who should be involved in selection
of risk reduction strategies? The article also provides information on how to
select risk reduction strategies.
http://ctb.ku.edu/en/tablecontents/sub_section_main_1161.aspx
Risky Business – Or Not!
This online activity allows students to learn about the risks in company stocks
and other risk factors within a company. The activity is completely laid out with
all needed materials listed and will take approximately three class periods to
complete.
http://www.thirteen.org/finance/educators/lesson4.html
Copyright © Texas Education Agency, 2012. All rights reserved. 5 Teacher Preparation:
Teacher will:
1.
presentation, and
handouts.
2.
resources and websites.
3.
websites ready.
Review terms in outline,
Locate and evaluate various
Have assignments and
Learner Preparation:
It is time to wrap up what the students have learned about
statistics. You will briefly describe commercial software for
statistics with examples the student might find interesting. Then
the student will get to apply what they have learned to analyzing
data.
Introduction:
STUDENTS will watch the Unit video found here:
jukebox.esc13.net/untdeveloper/Videos/Risk%20Management%
20Strategies.mov
STUDENTS will take the practice test and review using the Key,
found in Common/Student Documents.
EXHIBIT:
Excitement the topic of Risk.
INTRODUCE: The definition/concept of “risk”.
ASK:
Ask students to explain if they’ve ever fallen in a
restaurant or store because of the store’s
negligence?
Copyright © Texas Education Agency, 2012. All rights reserved. 6 I. Risk Management Fundamentals
A. Financial Risk Management
1. The practice of creating
economic value in a firm by
using financial instruments to
manage exposure to:
a. Credit Risk
b. Market Risk
c. Organizational Context
Use 12.1_RiskManagement
Fundamentals.pptx
B. What is the Organization's Mission?
1. Must address the problem of
protecting itself against changes
that can place the pursuit of this
fundamental objective “at risk”.
C. Identify Weaknesses
1. Do you have Specific
Weaknesses?
2. Weak Management team
3. Cash Flow Issues
4. Over Budgeted Expenses
5. Work Force Shortages
6. Intense Competition
7. Risks Inherent to:
D. External Context: emergence of
unfavorable laws and/or regulations;
negative changes to market
conditions; technological
innovations that favor competitors;
etc.
E. Operative Management : noncompliance with contractual
requirements; possible loss of
market share; possible loss of skills;
possible physical damage to
personnel; possible environmental
pollution; etc.
F. Financial Management : difficulty in
collecting accounts receivables;
unfavorable changes in exchange
rates; imbalances in liquidity; etc.
Copyright © Texas Education Agency, 2012. All rights reserved. 7 G. Identify Change
1. What is driving the change?
2. Opportunity, Government,
Economy, Marketing, Financing,
Risks Consequences
H. Why Money Loss
1. Revenue Falls Short
2. Escalating Expenses
3.Judgments, Fines, and Penalties
4. Security Breaches
5. Why Time Loss
6. Limited Human Resources
7. Limited Expertise
I. Calculate Probabilities
1. Comparison within Organization
2. Comparison within Industry
3. Calculate Risk
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option)
II. Risk Management Techniques
A. Protections
1. The value already created
by the organization
2. Its future opportunities,
favoring secure growth
3. Identify Rectifiers
4. Find and eliminate for road
blocks
5. Find Flow Restrictions and
open up the flow
6. Identify alternative courses of
action.
7. Identify Opportunities
Provided .docx files
12.1a_RiskManagement
Fundamentals.docx
Use 12.2_RiskManagement
Tecniques.pptx
Copyright © Texas Education Agency, 2012. All rights reserved. 8 8. Adds a positive approach to a
often negative response
process.
9. Examining and Solving a
problem often leads to
additional opportunities.
10. Management Presentation
a. Documents
b. Presentations
c. Memo and Notes
d. Follow-ups
e. Where to Apply
f. Advertising
g. Effective? Which add
campaign? Which
markets?
h. Quality control
i. Defect rate? Cost? Are
improvements working?
11. Finance
a. How high? How to
control? At what cost?
b. Auditing financial
statements. Are errors
material?
c. Lobbying (no
explanation needed)
B. Economic forecasting, background
info, measuring and controlling
productivity (human and machine)
1. Associations
a. Professional or Industry
Associations are often
used to reduce risk.
b. Political Action
Committee Organizations in the US
which campaign
for/against political
candidates, ballot
initiatives, or legislation.
Provide Assignment sheets and discuss
and answer any questions about
assignment (In class or take homeInstructor’s Option) 12.2a_RiskManagement
Techniques.docx
Copyright © Texas Education Agency, 2012. All rights reserved. 9 Guided Practice:
See assignments.
Independent Practice:
Review document “Spreadsheets for Statistical
Purposes” – in Common Documents.
See assignments.
Review:
Question:
Describe what is meant by risk?
Question:
Describe some of the basic
tactics for reducing risk.
Question:
Have the students do a general
overview of their parents’ garage
or tool and make a list of
potential areas of risk. Describe
them in detail; then, list the ways
in which parents are liable.
Create a plan of action for
parents to reduce risk.
Informal
Assessment:
Instructor should observe student discussion and monitor interaction.
Formal Assessment:
Completion of provided assignments using included keys for grading.
Copyright © Texas Education Agency, 2012. All rights reserved. 11 Student Assignment
12.1a Risk Management
Fundamentals Key
Name: ____________________
According to King James the 1st in (1566-1625) “Smoking is hateful to
the nose, harmful to the brain, and dangerous to the lungs.”
How has the Cigarette industry mitigated risk to their core business of
manufacturing and selling cigarettes? Find examples and explain.
Key word search: cigarette company research, cigarette company
ethics, cigarette company marketing, cigarette company politics
Answers will vary per student, but look that they have made an effort to
fulfill the requirements of this assignment any various levels. You may
ask yourself does this student demonstrate the ability to find some
definitive research on which to base their opinions on.
Copyright © Texas Education Agency, 2012. All rights reserved. 12 Student Assignment
12.2a Risk Management Techniques
Key
Name: ____________________
You have decided when you graduate you want to see the world and
have decided to travel across the globe. You parent have agreed to
match your savings up to $5000.00 to fund the trip.
What risks can you identify that will you encounter on your trip?
What precautions can you take to mitigate these risks?
Answers will vary per student, but look that they have made an effort to
fulfill the requirements of this assignment any various levels. This
should really be a fun assignment. The student can really be creative on
where they want to go and all the issues that may arise.
Copyright © Texas Education Agency, 2012. All rights reserved. 13 Name:__________________________
Date:________________________
Class:___________
Risk Management Strategies Test
TRUE/FALSE:
_____1. Basically risk management helps the business make the right moves in order to protect itself against bad things
happening.
_____2. Not every business should be concerned with risk.
_____3. A company should identify their weaknesses in order to understand their risks.
MATCHING:
a. External Context
b. Operative Management
c. Financial Management
_____4 Risks include non-compliance with contractual requirements, loss of market share, loss of skills, physical damage
to personnel, environmental pollution
_____5. Risks include difficulty in collecting accounts receivable, unfavorable changes in exchange rates, imbalances in
liquidity
_____6. Risks include emergence of unfavorable laws and/or regulations, negative changes to market conditions,
technological innovations that favor competitors
_____7. Which of the following would NOT be a weakness of a company?
a. Cash Flow Issues
b. Over Budgeted Expenses
c. Weak Management Team
d. Work Force Shortages
e. Minor Competition
_____8. The possible financial loss that a policyholder will suffer if property is damaged or destroyed would be:
a. An insurance policy
b. The amount of $400
c. A risk
d. The deductible
_____9. Which type of risk would NOT be an example of a non-insurable risk?
a. A road closure in front of your business
b. Products that can’t be sold because the fashions have changed
c. The theft of expensive furs from your store
d. A poor investment choice made by a financial manager
Copyright © Texas Education Agency, 2012. All rights reserved. 14 Name:__________________________
Date:________________________
Class:___________
10. List three reasons that a company might lose money:
1.___________________________________
2.___________________________________
3.___________________________________
MATCHING:
a.
b.
c.
d.
e.
f.
g.
Insured
Insurer
Peril
Policy
Policyholder
Premium
Risk
_____11. Person or business purchasing insurance
_____12. Persons or organizations covered by the insurance policy
_____13. Uncertainty that a loss may occur
_____14. Company that sells insurance
_____15 Written agreement, or contract, between the insurer and the policyholder
_____ 16. Payment by a policyholder to the insurer for protection against risk
_____17. Cause of a loss for a person or organization. An example would be a fire.
Briefly explain each of the following techniques for managing risk, and give at least one example of each:
18. Avoidance:
19. Loss Control:
20. Retention:
21. Noninsurance Transfers:
22. What might happen to a company if the owners decided to put money into savings rather than purchase an insurance
policy?
Copyright © Texas Education Agency, 2012. All rights reserved. 15 Name:__________________________
Date:________________________
Class:___________
MATCHING:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
Burglary and robbery insurance
Fire insurance
Business income insurance
Transportation insurance
Collision insurance
Comprehensive insurance
Vehicle Liability insurance
Health insurance
Disability insurance
Life insurance
Liability insurance
Malpractice insurance
Bonding
23._____Provides funds to replace such items as buildings, furniture, machinery, raw materials, and inventory damaged
or destroyed by fire.
24._____A type of liability insurance that protects against financial loss arising from suits for negligence in providing
professional services.
25.____Provides protection against the expenses of individual health care
26.____Protects against damage, theft, or complete loss of goods while they are being shipped
27._____Offers payments to employees who are not able to work because of accidents or long-term illness
28._____Pays money upon the death of the insured
29.____Provides protection from loss resulting from the theft of money, inventory, and other business assets
30._____Pays damages to people whose losses are caused by the negligence or dishonest of an employee or by the
failure of a business to complete a contract
31._____Provides protection against damage to the insured’s own vehicle when it is in a collision with another car or
object
32._____Provides protection against damage caused by the insured’s vehicle to other people or their property
33._____Protects against losses from injury to people or their property that result from the products, services, or
operations of the business.
34._____Compensates firms for loss of income during the time required to restore damaged property.
35._____Covers loss to your vehicle by something other than collision.
Copyright © Texas Education Agency, 2012. All rights reserved. 16 Risk Management Strategies Test
Key
1. T
2. F
3. T
4. B
5. C
6. A
7. E
8. D
9. C
10. Revenue falls short, expenses increase, a judgment,
fine, or penalty imposed on the business, security
breach
11. E
12. A
13. G
14. B
15. D
16. F
17. C
18. Avoidance: avoid the risk, to avoid divorce, don’t get
married
19. Loss Control: loss prevention and loss reduction, strict
security measures at the airport, installing a sprinkler
system
20. Retention: retaining part of the risk, active retention would be having a deductible so that you can save money, passive retention which could be due to ignorance or indifference, or self‐ insurance 21. Noninsurance Transfers: transfer risk by contract, by 22. What might happen to a company if the owners decided
to put money into savings rather than purchase an insurance
policy? Answers will vary
Copyright © Texas Education Agency, 2012. All rights reserved. 17 MATCHING:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
l.
m.
Burglary and robbery insurance
Fire insurance
Business income insurance
Transportation insurance
Collision insurance
Comprehensive insurance
Vehicle Liability insurance
Health insurance
Disability insurance
Life insurance
Liability insurance
Malpractice insurance
Bonding
B23._____Provides funds to replace such items as buildings, furniture, machinery, raw materials, and
inventory damaged or destroyed by fire.
L24._____A type of liability insurance that protects against financial loss arising from suits for
negligence in providing professional services.
H25.____Provides protection against the expenses of individual health care
D26.____Protects against damage, theft, or complete loss of goods while they are being shipped
I27._____Offers payments to employees who are not able to work because of accidents or long-term
illness
J28._____Pays money upon the death of the insured
A29.____Provides protection from loss resulting from the theft of money, inventory, and other business
assets
M30._____Pays damages to people whose losses are caused by the negligence or dishonest of an
employee or by the failure of a business to complete a contract
E31._____Provides protection against damage to the insured’s own vehicle when it is in a collision with
another car or object
G32._____Provides protection against damage caused by the insured’s vehicle to other people or their
property
K33._____Protects against losses from injury to people or their property that result from the products,
services, or operations of the business.
C34._____Compensates firms for loss of income during the time required to restore damaged property.
F35._____Covers loss to your vehicle by something other than collision.
Copyright © Texas Education Agency, 2012. All rights reserved. 18 Copyright © Texas Education Agency, 2012. All rights reserved. 19