Exam 23: Appendix: Managing Risk

Tom and Sarah are both 24 years old and looking for car insurance. While comparing numbers, they notice the car insurance premiums charged for young male drivers are higher than the premiums for young female drivers. This is due to the rule of indemnity.

The beginning of an effective risk management strategy is a good loss-prevention program.

If a pure risk occurs, a company loses money. However, if the events do not occur, the company gains nothing.

A firm that chooses to self-insure and cover losses out of its budget is said to

The ________ says that an insured person cannot collect more than the actual loss from an insurable risk.

The chances of dying when young are much higher than the chances of becoming disabled when young.

The management of risk is a small part of global business.

An example of an uninsurable risk would be the potential losses suffered by Patrick's Pizza Pies resulting from a popular new product from Paulie's Pizza Palace.

The chance of a fire is an example of a pure risk.

Pure risk involves the chance of either a profit or a loss.

A terrorist attack is an example of pure risk.

________ is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss.

The federal government provides some insurance protection.

Marshall Manufacturing has decided to stop producing football helmets due to the potential size of losses involved in product liability cases. This is an example of "avoiding risk" as an alternative risk management strategy.

Explain the four ways of managing risk.

Amusement parks often have a minimum height restriction on some of their most thrilling rides. This risk management strategy is done in an effort to

Soap Stars, Inc. is ready to launch a new shampoo in the marketplace. They will incur a speculative risk.

The type of risk that is of most concern to businesspeople is speculative risk.

Typically, the only option that firms have to deal with pure risk is to buy insurance.

Risk management is