Exam 23: Appendix: Managing Risk

Erin received a letter from her employer's insurance company inquiring if her children had health insurance coverage from another provider. According to the ________, the insurance provider has the right to this information.

A mutual insurance company is a nonprofit organization.

Liability losses result from property damage or injuries suffered by others for which the policyholder is held responsible.

In an effort to minimize the cost of conventional property/casualty insurance, Epic Electronics decided to manage their risk by self-insuring. The most likely way Epic would try to do this would be to

Worldwide risks need to be prioritized so that international funds can be spent where they can do the most good.

A surety bond protects employers from employee dishonesty.

 Explain the difference between speculative risk and pure risk. Which type of risk is of more concern to businesspeople?

A well-designed and implemented risk-prevention program can eliminate the potential of loss.

The National Highway Traffic Safety Administration (NHTSA) provides consumers with recall notices for all makes and models of cars, trucks, motorcycles, and even school buses. In terms of risk management, the purpose of the NHTSA service is

An uninsurable risk is one that no insurance company will cover.

SpeedyTime Delivery Service is managing risk by requiring all drivers to wear seat belts and hold a commercial driver's license, by monitoring any moving violations each driver obtains, and by keeping that information in the employee records. Additionally, SpeedyTime carries an insurance policy with a very large deductible, preferring to pay for small damages to its trucks out-of-pocket. SpeedyTime has built enterprise risk management into their organization.

Atlanta Appliances produces all of its products in one gigantic production facility near an earthquake fault line. Atlanta Appliances is the classic example of a firm that should use self-insurance to manage its risks.

Antonio is a silversmith and works with various metals. At the end of the day, he reclaims and separates each metal by using an inexpensive toxic acid though other methods are available. The risk of fire as well as health dangers to Antonio is unknown. What should Antonio do?

Property insurance covers losses from fires, accidents, or theft.

An entrepreneur takes a speculative risk when starting a new business.

The premium charged for workers' compensation insurance is the same for all workers, regardless of their occupation.

Risks such as global warming are the concern of businesses and governments primarily in the U.S.

Workers' compensation insurance guarantees payment of wages, medical care, and rehabilitation services for employees who are injured on the job.

Simon owns several gas stations. He realizes that among the several risks associated with this type of business is the risk of minor damage to cars from dirty or contaminated fuel. He also knows that there is a small chance of a major loss if a fire occurred at one of his gas stations. Simon wants to control his insurance costs while still maintaining a reasonable risk management program. He is considering self-insurance. If he decides to use this approach, he will probably

Ernesto is opening a new car wash. The required investment of money and time is sizable and although he has high hopes, Ernesto is taking a speculative risk. What does this mean?