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zick2 Risk 1 English 55 cards

Cards in this deck (55)

  1. 1Pure RiskEvents that can only produce a loss
    (If it doesn't happen, nothing changes)
    (ex. hurricane is coming, could destroy your store, but the hurricane could turn direction and never come)
  2. 2Probability of a lossOdds
    Ranges from 0-1/0-100%
  3. 3Pure V. Speculative Risk-Both Involve uncertainty
    -The difference is in the outcomes
  4. 4Speculative Risk3 things than can occur: Gain, Lose, Stay the same.
    (ex. Gambling, buying stock)
    -Basis for enterprise risk management (ERM)
  5. 5Static RiskSituation not significantly affected by the business environment and remains constant over time
    (ex. weather, car accidents)
    Static risks are insurable.
  6. 6Dynamic RiskExposure to loss from changes in environment of the business.
    (ex. fashion trends, people's tastes, regulations)
    (ex. blockbuster went out of business because of things like netflix, movie streaming.
  7. 7Subjective RiskA persons view of uncertainty or a situation involving a risk
    (not easy to measure or compare)
    (Some people are scared to travel on an airplane some aren't because they view the risk of a crash differently)
  8. 8Objective RiskThe measure in variation of uncertain outcomes because of facts.
  9. 9Financial Consequences of RiskAn organization considers all of its components and estimates financial consequences to better determine where to focus risk management
  10. 10Cost of residual uncertaintylevel of risk that remains after individuals or organizations implement their risk management plan
  11. 11Moral HazardA person acts differently because of insurance
    Fraud and dishonesty
    Presence of insurance = change in behavior
  12. 12Morale HazardCarelessness concerning losses
    (leaving car unlocked hoping it gets stolen so that you can claim insurance money and get a new one)
  13. 13Financial Consequences of Risk and the Burden of Risk1- Expected cost of loss
    2- Cost to manage/Risk mgmt. expenditures
    3- Residual uncertainty
  14. 14Risk Management ProcessManage pure and speculative risks
    Goal is to minimize the financial impact on organizations
  15. 15Risk ManagementSpecialized branch of financial management
    -Finance dpt (small)
    -Risk manager (medium)
    -Chief Risk Officer (Large)
  16. 161950's FirmsDidn't manage risk, just bought insurance
  17. 171960'sWayne Snider (Temple) coined the term Risk Management in book that he contributed to, after that it became a strategy
  18. 18Steps in the risk process1- Identify exposures to loss
    2- Evaluate exposures to loss
    3- Identify possible alternatives
    4- Select among the alternatives
    5- Implement of chosen option
    6- Re-evaluate periodically the chosen strategies
  19. 19Identify loss exposures (Step 1 in process)The possibility of a financial loss that a particular entity faces as the result of peril striking a thing of value.
  20. 20How to identify exposures1- inspection of plant and facilities (walk arounds)
    2- contract analysis
    3- Look at past info
    4- Share loss info w/ other similar firms through trade associations
    5- Checklists/standardized surveys from insurance companies
    6- Flow chart approach
    7- Ask employees or managers in the firm
    8- Financial statement approach
  21. 21Types of loss exposuresProperty
    Net Income
    Personnel
    Liability
  22. 22Property Loss Exposure Real PropertyLand
    Buildings
  23. 23Property Loss Exposure Personal PropertyTangible- Equipment, furniture, clothes
    Intangible- Goodwill, patent, trademark
  24. 24Ownership InterestMost common type of interest
    Can have present or future ownership interest
    Possession of equity in the capital (stocks)
  25. 25FOB Point"Free on board" point. The point when ownership transfers.
    (ex. you ship something using FedEx, post in description that you aren't responsible for shipping damages. That is the FOB point)
  26. 26Bailee InterestAn entity who receives property from another under a contract of bailment
    (ex. renting a car)
  27. 27Tennent InterestResponsibility to return property in reasonable condition
  28. 28Net Income Loss Exposures (Business Interruption)A firm suffers a primary loss- As a result of that they also suffer a secondary loss that results indirect expenses
    (decrease in revenue, increase in expenses, impact the bottom line/net income)
  29. 29Net Income Loss Exposures (Business Interruption)Damage to property
    -Key supplier has a property loss
    -Power or telephone loss
  30. 30Net Income Loss Exposures (Business Interruption)Personnel loss exposures
    -A firm has a key employee who suffers a personal loss
  31. 31Liability loss exposure-Lawsuits
    Legal liability is established when there was negligence or actual damages/losses
  32. 32NegligenceFailure of person to exercise the proper degree of care
  33. 33Absolute/Strict LiabilityImposition of liability on a party without a finding of fault. Only need to prove what happened and that the person was responsible
  34. 34Measurement of LossesProperty Losses
    -Simple to calculate
  35. 35Measurement of LossesBodily Injury
    -Special damages
    -Compensate for measurable losses
    -Medical expenses
    -Loss of income
    -Easier to calculate
  36. 36Measurement of LossesGeneral Damages
    -Compensate for intangible loss
    -Pain and suffering
    -Mental anguish
    -Difficult to estimate and measure
  37. 37Measurement of LossesPunitive Damages
    -Amounts assessed as form of punishment
    -Gross negligence is involved
    -Difficult to estimate and measure
  38. 38Defenses to Liability-Assumption of risk by injured party
    -Comparative/Contributory negligence
  39. 39Res Ipsa Loquitur "The thing speaks for itself"Modification to law of negligence
    -Presumption of negligence on part of defendant
    -Not strict liability
    -Fact of an injury is sometimes enough (normally wouldn't occur unless negligence, defendant exclusively controls the tool/equip)
  40. 40Vicarious LiabilityOne person become legally liable for the negligent behavior of another
  41. 41Joint and several LiabilityNegligence of two or more parties
    -Injured party may recover the entire amount of compensation from any negligent party who is able to pay
  42. 42Product LiabilityManufacturers of a faulty product that injures someone or damages property may be held legally liable
  43. 43Premises LiabilityOwner or tenant may be held liable for damages if someone is injured
  44. 44Trespasser (Premises Liability)Obligated to abstain from doing intentional harm
  45. 45Licensee (Premises Liability)Comes on to property with your knowledge
  46. 46Social Guest/Invitee (Premises Liability)A person who is invited to your proptery
  47. 47Animal LiabilityExotic animals = always strict liability
    If your dog can kill=strict liability
  48. 48Enterprise Risk Management ERMManage risk and seize opportunity
    -Risk based approach to managing an enterprise
  49. 49Hazard RiskFire
    Flood
    Lawsuits
  50. 50Financial RiskPrices
    Volatility
    Liquidity
    Credit
  51. 51Operational RisksManufacturing products
    -Supply chain issues
    -Service provider failures
    -System failure
    -Product recall
    Regulatory Issues
  52. 52Strategic or Business Risk-Customer service issues
    -Public relations
    -Competition
    -Ethical issues
    -Social trends
  53. 53Total Risk Mgmt TRMFocuses mainly on hazard type risks, departmentalized approach
  54. 54Enterprise Risk Management ERMIntegrated approach, occurs at enterprise level instead of individual departments
  55. 55TRM v. ERM

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1 Risk Flashcards on Untitled, created by zick2 on 08/02/2016.
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zick2
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