Chapter 6 Flashcards
Risk Management
Risk Management
Is the process of making and carrying out decisions
that will minimize the adverse effects of accidental
losses upon an organization
Loss Exposure
Is the chance of a financial loss as a result of a peril
striking a thing of value
Tangible Property
Property that is real, can be touched, and has form
and substance
Going Concern Value
The difference in the value of property which
must be sold after a loss and its value had the
business continued
Intangible Property
Property that has no physical substance and
consists of legal rights rather than things
Expediting Costs
The extra costs incurred in haste when recovering a business after a loss
Risk Control
Refers to the steps taken to reduce the frequency
and severity of losses as much as possible
Risk Financing
Is concerned with paying those losses that
inevitably occur
Segregation
Involves arranging an organization’s activities and
resources so that no single event can cause
simultaneous losses to all of them
Separation
Involves dividing an organization’s single asset or
operation into two or more separate units
Duplication
Involves reproduction of an organization’s asset
Retention
Generating funds from
within the business to pay for losses
Contractual Transfer
Includes all means of generating funds from
outside the business to pay for losses
