FINA 406
CHP:3, TOPIC:3, RISK MANAGEMENT ESSENTIALS
Assignment:3
ESSAY OUESTIONS
1.
List and explain three desirable risk management goals likely to be found in a statement of
objectives and principles.
2. Describe some purposes served by a risk management manual.
3. Explain three alternative methods a risk manager may use to identify and measure direct property
losses.
4. Do all firms face liability losses? Explain your answer
5. List and explain the three main categories of loss control activities.
6. What are the potential advantages of a self-insurance program? What are the potential
disadvantages?
7. What are the steps in developing a risk management plan? Why is the order of the steps
important? Which step is the most difficult to accomplish?
8. What are the requirements for a self-insurance plan as opposed to simple risk retention?
9. How is loss prevention different from loss reduction? Give some examples of each.
MULTIPLE CHOICE QUESTIONS
1.
a.
b.
c.
d.
Direct property losses would include each of the following except:
Losses to owned buildings
Losses to leased buildings
Losses of inventory
Loss of income after inventory is destroyed by fire
2.
a.
b.
c.
d.
To estimate the value of potential property losses, risk managers should focus on:
The purchase price of the property
The property’s book value
The property’s replacement cost "
The property’s fair market value
3.
a.
b.
c.
d.
Typical sources of liability losses include all the following except:
A worker allows a machine to be destroyed by improper maintenance
Losses caused to workers injured on the job
Losses caused to the real property of others
Losses caused by bodily injury to customers in a store
4.
a.
b.
c.
d.
Risk avoidance:
Means measures are taken to eliminate the loss exposure
Means measures are taken to reduce loss severity
Means insurance has been purchased and the risk transferred to an insurance company
Is never a useful risk management tool
5.
a.
b.
c.
d.
6.
“The logical development and carrying out of a plan to deal with potential losses” is the
definition of:
Loss control
Risk management
Emergency response team
Risk financing using derivative options
The purpose of a risk management flow chart is to represent graphically the production and
distribution process to help the risk manager identify:
a. Insurance policies
b. Liability loss
c. Nearby fire departments
d. Production bottlenecks