Exam 23: Managing Risk in the Small Business

According to the textbook, risk is a condition in which there will be a known and adverse deviation from a desired outcome that is expected or hoped for.

You Make the Call-Situation 1 The Amigo Company manufactures motorized wheelchairs in its Bridgeport, Michigan, plant, under the supervision of Alden Thieme. Alden is the brother of the firm's founder, Allen Thieme. The company has 100 employees and does $10 million in sales a year. Like many other firms, Amigo is faced with increased liability insurance costs. Although Alden is contemplating dropping all coverage, he realizes that the users of the firm's product are individuals who have already suffered physical and emotional pain. Therefore, if an accident occurred and resulted in a liability suit, a jury might be strongly tempted to favor the plaintiff. In fact, the company is currently facing litigation. A woman in an Amigo wheelchair was killed by a car on the street. Because the driver of the car had no insurance, Amigo was sued.

John Dresser, who owns a small manufacturing concern, has just signed a commercial property policy with a clause requiring Dresser to maintain insurance equal to 80 percent of the property's value at the time of an actual loss. Dresser has accepted what is known as a ____ clause.

A small company can protect itself against the death of important personnel by carrying key person insurance.

Business interruption insurance pays for lost income.

A customer's slip and fall injury would be covered by

Aloft Aircraft Company can purchase ____ life insurance on its chief aircraft designer as an inexpensive way to cover its losses should something untoward happen to that key person.

Driving as safely as possible is an example of

Damage to a building by fire is an example of

Key-person disability insurance

Which of the following is not a tort liability discussed in the book?

Most small business advisors recommend ____ life insurance for key-person policies.

A fidelity bond protects against loss from employee fraud.

The type of insurance that provides protection against a type of customer-oriented risk is

Which of the following is not encompassed in the broad meaning of risk management?

List and briefly explain the different types of property.

One risk that small businesses do not normally consider is loss due to the disability of a partner or other key employee of the company.

Theft due to a burglary would be classified as a

Evaluation and review is an important step in the risk management process because

Life insurance purchased by a company with the company as sole beneficiary is