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Exam 22: Bonus B: Managing Risk

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Question 71

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Outsourcing helps some companies avoid risk.

A) True
B) False

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Question 72

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A stock insurance company is owned by its policyholders.

A) True
B) False

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Question 73

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Speculative risk involves a chance of either profit or loss.

Businesses can often reduce the risk to which they are exposed.

Typically,Health Maintenance Organizations (HMOs)offer members more flexibility in the choice of doctors and health care than other forms of health insurance providers.

Discuss the difference between HMOs and PPOs.

Constitutional Corporation is a mutual insurance company.The company has had a good year,with the amount of premiums exceeding the amount of claims by a significant amount.This is likely to result in a(n) :

Which type of risk management strategy is a company using when it installs mirrors and surveillance cameras to spot and prevent shoplifting?

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

Self-insurance makes more sense for firms that operate one large facility than it does for firms with facilities scattered all over the country.

The federal government provides some insurance protection.

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

Abraham is excited about opening his car wash facility.The required investment of money and time is sizable and although he has high hopes,Abraham is taking a speculative risk.This means that:

According to the rule of indemnity,an insured person cannot collect more than the actual loss from an insurable risk.

Some businesses will set aside money to cover routine losses and buy "catastrophe" policies to cover big losses.This is an example of which of the following?

Nancy owns a high-fashion boutique and one source of competitive advantage in the past has been her ability to spot the latest trends,stock the store with those items,and sell out before the next new trend becomes popular.Unfortunately,this year Nancy missed on what would be "hot" and is now stuck with mountains of clothing and accessories that did not sell.All of her cash is invested in this clothing and at the moment she is unable to restock the store with the next season's clothes.Nancy is likely not worried because:

Proctor & Gamble Inc.is ready to launch a new shampoo in the marketplace.They will incur a speculative risk.

Health savings accounts are managed care plans that have a high deductible.

UPS requires their delivery people to wear seat belts as they drive their trucks.This is an example of self-insuring as a risk management strategy.

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