Discount Department Stores is a national retail chain. The company had one large, central warehouse. At the suggestion of the risk manager, the company decided to build four smaller regional warehouses so that a loss at the central warehouse would not be a catastrophic blow to the company’s distribution system. Splitting the inventory between four […]
Each accounting period, Harris Company Department Store charges a bookkeeping account for its estimated shoplifting losses. The method that Harris Company Department Store uses to fund its retained shoplifting losses is a(n) A) private insurance policy. B) captive insurer. C) credit line. D) unfunded reserve. ANSWER Answer: D
Parker Department Stores has been hurt in recent months by a large increase in shoplifting losses. Parker’s risk manager concluded that while the frequency of shoplifting losses was high, the severity is still relatively low. What is (are) the appropriate risk management technique(s) to apply to this problem? A) retention B) loss prevention C) transfer […]
When Derrick became risk manager of Boller Company, he noticed that the company did not have a clear set of risk management objectives and a clearly-stated risk management philosophy. Derrick developed a written document stating the company’s risk management objectives and risk management philosophy. This document is called a risk management A) policy statement. B) […]
Barb, who is self-employed, is the main breadwinner for her family. Barb does not have disability income insurance because she has never stopped to consider the impact of a long-term disability upon her family. Barb’s treatment of the risk of disability is best described as A) risk transfer. B) passive retention. C) risk avoidance. D) […]
Morris Company self-insures its workers compensation loss exposure. The risk manager of Morris Company is concerned about the possible impact of a single catastrophic claim. She decided to set a retention limit of $500,000 per-claim, and to purchase insurance that will be begin to pay once Morris Company has paid $500,000 on a single claim. […]
In reviewing his company’s operations, a risk manager noticed that all of the company’s finished goods were stored in a single warehouse. The risk manager recommended that the finished goods be divided among three warehouses to prevent all of the finished goods from being destroyed by the same peril. Dividing the finished goods among three […]
The U.S. government is concerned that terrorists might try to crash a vehicle loaded with explosives into a U.S. embassy in a foreign country. Inside the gate to the embassy, they installed steel and cement posts in the road. These posts can be raised up from the ground to form a barrier against suicide bombers. […]
To better understand her company’s operations, a risk manager asked a production manager to draw a diagram tracing the steps in the production and distribution of the company’s products. Such a diagram, which is useful in risk identification, is called a A) financial statement. B) risk management matrix. C) flowchart. D) risk management audit. […]
David never stopped to consider the possible consequences of a long-term, permanent, disability. So David did not include disability income insurance in his personal risk management program. David is dealing with the risk of disability through A) passive retention. B) active retention. C) risk control. D) risk avoidance. ANSWER Answer: A
