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18 Cards in this Set
- Front
- Back
Loss Exposure
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situation/physical circumstance that creates vulnerability to loss, damage or injury AND will lead to a financial loss
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Uses of Risk Management (3)
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- determine the exposures the clients need to manage
- provide plan of action to manage those risks - recommend insurance coverage for those risks best served by insurance cover |
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Commercial Insurance
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- category of insurance for professionals, businesses, govs, orgs
- may be offered in Commercial Package Policies - often requires several policies to fully cover/insure the risks |
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Commercial Package Policies
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include a variety of property and liability coverages together in a program
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Per-Loss Objectives
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to be accomplished before a loss occurs
- social responsibility - comfort level: tolerance for uncertainty - operating economically - externally imposed obligations |
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Externally Imposed Obligations
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- legal or based on agreements made with customers
- following these objectives helps maintain relationships and keep you out of trouble |
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Operating Economically
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Cost of Risk: costs associated with managing pure risk.
Includes: - cost of premiums - recovery from uninsured losses |
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Post-Loss Objectives
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- social responsibility
- operational continuity - sustaining growth - survival - maintained stable earnings |
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Cost to operate continuously
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- renting new space -> advertising new address -> possibly higher cost
- lost income if goods cannot be produced for customers to buy especially vital for indispensable businesses such as internet or telephone providers often necessary for the survival of the business |
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Maintained Stable Earnings
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Done by:
- cutting expenses by an amount proportional to the loss in sales - laying off workforce - reducing/eliminating purchase of raw materials - reducing heating/cooling costs due to plant shutdown |
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reciprocal agreements with other businesses are done in order to maintain operational continuity in the event of a loss
Making agreements is easier with ______ products. More difficult with ______ products with _______ techniques behind their production |
generic, unique
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Elements of A Loss Exposure
List the 3 distinct elements |
1. item subject to loss
2. potential cause of the loss (peril) 3. financial consequences of the occurrence |
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Items subject to loss are categorized into
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- physical assets
--> loss of use of these assets - legal liabilities - personal health and earning capacity (human assets) --> program to train highly skilled people must be in place |
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________ provides financing for training expenses when a high level employee leaves
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"key person" insurance
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Perils are grouped by origin into 3 general categories
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1. human - vandalism, arson, theft
2. natural - forces of weather and earth 3. economic - changes in consumer taste, currency fluctuations, depreciation, expropriation, stock market declines, technology advances |
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________ perils are generally not insured
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economic
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Financial consequences are affected by
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1. reduced value of asset
2. decreased income from derived asset 3. increased expenses to keep asset operating |
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Risk Manager's Role
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- develop/co-ordinate risk management functions
- serve as advisor - id loss exposures - prevent loss - informing/being a resource to upper management - reducing loss - loss financing |