风险管理与保险前半学期课后练习答案：IMch05

1、CHAPTER 5Risk Management Techniques: Noninsurance MethodsRISK AVOIDANCELOSS CONTROLTypes of Loss ControlFocus of Loss ControlTiming of Loss ControlDecisions Regarding Loss ControlPotential Benefits of Loss ControlPotential Costs of Loss ControlRISK RETENTIONPlanned versus Unplanned RetentionFunded v

2、ersus Unfunded RetentionCreditReserve FundsSelf-InsuranceCaptive InsurersDecisions Regarding RetentionFinancial ResourcesAbility to Predict LossesFeasibility of the Retention ProgramRISK TRANSFERHold-Harmless AgreementsForms of Hold-Harmless AgreementsEnforcement of Hold-Harmless AgreementsIncorpora

3、tionDiversificationHedgingInsuranceTHE VALUE OF RISK MANAGEMENTKEY TERMS AND CONCEPTS Broad formHedgingRisk transferCaptive insurerHold-harmless agreementsSelf-insuranceConcurrent loss control Indemnity agreementsSeparationDiversificationIntermediate formSeverity reductionDomino theory Limited formS

4、peculatorDuplication Loss controlTransfereeEnterprise-wide riskPlanned retentionTransferor managementPost-loss activitiesUnfunded retentionFrequency reduction Pre-loss activitiesUnplanned retentionFunded retention Risk avoidanceHedgerRisk retentionANSWERS TO QUESTIONS FOR REVIEW AND DISCUSSION1. Ris

5、k avoidance is a conscious decision not to expose oneself or ones firm to a particular risk of loss. This technique is appropriate when the costs of an activity are small in comparison with the benefits.2. Frequency reduction involves an attempt to reduce the probability that a loss will occur. For

6、instance, XYZ Corporation could institute a fire safety program designed to educate warehouse employees to be on the alert for fire hazards within the warehouses. Severity reduction involves methods of reducing the magnitude of a loss. XYZ Corporation could install fire extinguishers at various loca

7、tions within the warehouses in an attempt to ensure that small fires are extinguished before they spread. Separation involves making certain that needed goods are not all stored in the same location so that all of the goods will not be destroyed in one occurrence. XYZ Corporation could make certain

8、that needed supplies are not all stored in the same warehouse.3. Separation involves the reduction of the maximum probable loss associated with a certain risk. A firm may disperse materials in such a way that an explosion or other catastrophe will not damage more than a limited amount of materials.

9、Duplication might be used instead if there is an extreme need to have a certain piece of machinery around continuously, such as extra computers at another location.4. Some categories are (1) repair or replacement of damaged property, (2) income losses due to destruction of property, (3) extra costs

10、to maintain operations following a loss, (4) adverse liability judgments, (5) medical costs to treat injuries, and (6) income losses due to deaths or disabilities.5. Risk retention can be planned or unplanned and involves the assumption of a risk. A loss will be paid for out of the funds of an indiv

11、idual or a firm at the time that the loss is experienced. Large firms can typically absorb some losses that a smaller firm could not because large firms may have greater financial resources. Large firms also have the advantage of a larger number of exposure units, making more accurate loss predictio

12、n possible.6. Planned retention involves a conscious and deliberate assumption of recognized risk. Unplanned retention occurs when the existence of a risk is unknown or underestimated. Unfunded retention occurs when there is no intent to make funding arrangements in advance of a loss. Funded retenti

13、on involves making various pre-loss arrangements to ensure that money is readily available to pay for losses that occur. All of these techniques can be appropriate depending on the type of losses considered, as long as there is an intent of the firm to apply the technique after careful analysis.7. C

14、redit provides some limited opportunities to fund losses that result from smaller retained risks. Use of credit for large losses is virtually impossible if there was no previous arrangement with a lending institution. Creditors may be unwilling to loan money to a firm facing bankruptcy because of a

15、large loss.8. Self-insurance must (1) involve a group of exposure units large enough to ensure accurate loss prediction and (2) the expected losses must be prefunded through a fund especially designed for that purpose. The establishment of a reserve fund does not necessarily involve a large enough n

16、umber of exposure units to make accurate prediction possible.9. Some financial factors are (1) total assets, (2) total revenues, (3) asset liquidity, (4) revenues/net worth, (5) retained earnings, and (6) total debt/net worth. In all of these except the last one, the greater the number the greater t

17、he ability to retain risk. In the case of the last ratio (total debt/net worth), the opposite is true.10. Risk transfer involves a transferor, who pays or gives other valuable consideration to a transferee, who then bears the risk.11. Hold-harmless agreements differ in the extent to which risk is tr

18、ansferred. The limited form states that all parties are responsible for liabilities arising from their own actions. The second type is the intermediate form in which the transferee agrees to pay for any losses in which both the transferee and transferor are jointly liable. Another is the broad form

19、that requires the transferee be responsible for all losses arising out of particular situations, regardless of fault.12. Courts may not enforce a hold-harmless agreement if a transferor has superior bargaining power or knowledge in comparison to the transferee. For example, contracts between a candy

20、 manufacturer and its distributors may state that the distributor must pay for all losses arising out of consumers use of the candy. However, if the distributors are students who are using the candy to raise funds, the courts probably would not enforce the clause.13.Through incorporation, a firm can

21、 transfer risks from shareholders (transferor) to the firms creditors (transferee). This transfer is possible because personal assets of the owners cannot be attached to help pay for business losses as in sole proprietorships and partnerships. 14. Diversification serves as a form of risk transfer by

22、 creating a sharing of risk between business segments or geographic locations. Much like pooling of risk exposures by an insurer results in risk reduction, the diversification of a firms operations across different geographic locations or business segments, assuming less than perfect correlation amo

23、ng these exposures, can reduce total risk.15. One loss control method could be to simply decide not to produce lights that are extremely hazardous The risks identified may vary greatly, but should include damage or loss by such perils as fire, flood, and other natural disasters, as well as theft or

24、misplacing the books. Risk management techniques identified will also vary with the students imaginations but may include: risk transfer (homeowners insurance may provide some coverage), risk avoidance (borrow a friends book instead of purchasing one or drop the class and get a refund from the books

25、tore), loss control (writing name in book or buying water resistant book bag), and risk retention. A wrong answer would be self-insurance, because the number of exposure units is probably not large enough.16. In self-insurance there must be a group of similar exposure units large enough to ensure ac

26、curate loss prediction and not subject to simultaneous destruction. Self-insurance is a systematic approach to managing the potential losses that may arise from this group. Risk retention is merely the planned or unplanned assumption of a risk. Even if a reserve fund is established as part of a risk

27、 retention decision, this does not presuppose a large number of exposure units. It merely indicates that a firm sets some money aside to help meet a contingent loss. Neither technique should be used unless the financial condition of the firm is such that it can withstand large and unusual losses and

28、 unless management is willing to accept the possibility of these losses.17. One loss control method could be to simply decide not to produce lights that are extremely hazardous. This would be considered avoidance and would emphasize frequency of losses since the goal is to reduce frequency to zero.

29、Also, this is a pre-loss activity. Another method would be to train installers to be aware of safe and unsafe installation procedures. This would concentrate on frequency reduction and is a pre-loss activity. Illuminating Concepts could separate some of the more dangerous lights from children and fl

30、ammable materials. This would emphasize frequency reduction and be a pre-loss activity. The store could buy fire extinguishers and train employees on what to do in case of a fire. This would focus on the severity of the loss and be a concurrent loss activity. Shock, smoke inhalation, and other injur

31、y training for employees would also focus on severity and would be considered a post-loss activity.18. The cost of avoidance is the revenue that is forgone by not selling the more hazardous lights. The benefits may be reduced liability judgments and reduced medical costs for injured persons. Whether

32、 the costs will outweigh the benefits will depend on the forgone revenue and the likelihood of an accident. The costs of training may be outweighed by the benefits of reduced liability judgments, medical costs, and repair or replacement of damaged property of third parties, especially if the trainin

33、g is inexpensive. The benefits of separation definitely outweigh the costs of putting some lights elsewhere. The costs of fire extinguishers and training outweigh the benefits of reduced income losses due to the destruction of property, reduced adverse liability judgments, and reduced extra costs to

34、 maintain operations.19. The Heinrich theory states that employee accidents can be viewed as a five-step process: (1) heredity and social environment, which causes persons to behave in a particular manner; (2) personal fault, which is the failure of individuals to respond appropriately in a given si

35、tuation; (3) an unsafe act or the existence of a physical hazard; (4) the accident; and (5) the injury that results. Great Lakes can take action in the first step by keeping records or reviewing industry averages on which type of employees seem to cause the most accidents and instituting training fo

36、r all employees. This training will hopefully have an effect on the second step as well. Most of the focus should be on step three by removing or reducing unsafe conditions or acts. If there are a number of slips and falls, Great Lakes can put down non-slip flooring in critical areas. If there are a

37、 number of boating accidents, drug testing and safe boating procedures could be implemented. Training on the care of injured persons would follow from the last step.20. For home mortgages and auto loans the home and the car, respectively, generally serve as collateral for the loan. To protect this c

38、ollateral the lender often requires the borrower to purchase property insurance coverage. The insurance coverage assures that financial resources will be available to repay the loan, even if the home or auto was destroyed. If insurance were not available the lender would either charge the borrower a

39、 higher interest rate or, perhaps, even refuse to loan the money at all.SUPPLEMENTARY QUESTIONS 1. It is commonly believed that the only moral risk management technique to protect the safety of an employee is loss control. Do you agree with this statement? Why or why not?While it can be argued that

40、a company probably has a moral obligation to use every reasonable opportunity to control losses by reducing the frequency and severity of employee injuries, there are several additional ways to manage this risk that would not offend most peoples sense of morality. For example, risks may be transferred through insurance or may be avoided. Risk