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Homework answers / question archive / True / False Questions 1) The management of risk is a small part of global business

True / False Questions 1) The management of risk is a small part of global business


True / False Questions

1) The management of risk is a small part of global business.

  1. An enterprise risk management (ERM) program has a goal of defining which risks the program will manage.
  2. Companies adopt risk management procedures to minimize the chance of business failure due to unplanned events such as security breaches, terrorist attacks, and natural disasters.
  3. Risk management involves minimizing the losses from unexpected events.
  4. Risk management is getting much simpler thanks to the Internet.
  5. Southern Deliveries has decided to manage risk by requiring drivers to wear seat belts, have a commercial driver's license, monitor any moving violations each driver obtains, and to be sure that this information is kept in the employee records. Furthermore Southern has decided to carry an insurance policy with a very large deductible, preferring to pay for small damages to its trucks out-of-pocket. Southern has built enterprise risk management into their organization.
  6. Fairweather Farms is located on Florida's Gulf Coast and is primarily engaged in raising and harvesting citrus fruit. The owners of Fairweather Farms are correct in beginning to think about how the risk of climate change might impact their crops in the future.
  7. Risk is a term that refers to the chance of loss, the degree of probability of loss, and the amount of possible loss.
  8. There are two different kinds of risk: passive and active.
  9. Speculative risk involves a chance of either profit or loss.
  10. Pure risk involves the chance of either a profit or a loss.
  11. An entrepreneur takes a speculative risk when starting a new business.
  12. The chance of a fire is an example of a pure risk.
  13. If a pure risk occurs a company loses money; but if the events do not occur, the company gains nothing.
  14. Businesses can often reduce the risk to which they are exposed.
  15. The type of risk that is of most concern to businesspeople is speculative risk.
  16. One way to lower the need for outside insurance is to self-insure.
  17. Product recalls can reduce risk.
  18. The beginning of an effective risk management strategy is a good loss-prevention program.
  19. Outsourcing helps some companies avoid risk.
  20. Self-insurance is the practice of setting aside money to cover routine claims and buying only "catastrophe" policies to cover big losses.
  21. Self-insurance makes more sense for firms that operate one large facility than it does for firms with facilities scattered all over the country.
  22. Going bare is a much less risky strategy for self-insurance.
  23. When a firm that is self-insuring against risk decides to cover losses straight out of its budget, it is said to be "going bare."
  24. A well-designed and implemented risk-prevention program can eliminate the potential of loss.
  25. All risks are insurable.
  26. The federal government provides some insurance protection.
  27. Federal Housing Administration (FHA) insurance provides insurance to property owners in high-crime areas.
  28. The Pension Benefit Guaranty Corporation provides retirement benefits, life insurance, health insurance, and disability income insurance.
  29. An uninsurable risk is one that no insurance company will cover.

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