Practice Exam Flashcards
Which party is giving up variability in exchange for certainty under workers’ compensation?
Both the employer and the employee
The purpose of the “unreasonable” standard is to…
encourage an efficient level of safety
When reviewing the balance sheet to identify property RM problems, we are most likely using it to:
determine that an exposure exists!!
Negative effects of risk do not
include the value of losses themselves!
Which of the following statements about real and personal property is true?
a. ownership of real property always results in greater property exposure than personal property.
b. real property is more likely to depreciate than is personal property.
c. organizations cannot own personal property.
d. real and personal property often are exposed to different types of perils and hazards.
d.
Suppose that an employer allows its employees to choose among a selection of retirement plans.
Assuming each plan is well funded, which plan would be preferred by a risk-averse employee?
defined benefit-in future employer pays certain amount based on formula (usually end salary x %)
- risky for employer because they don’t know what the end salary will be
- least risky for employee because they’re guaranteed money
The tax status of employee benefits can cause which of the following problem
tax status= benefits are not taxed
it may lead to excessive demand for health care
How can a costly worker safety program support the firm objective of profit maximization?
by generating greater productivity per dollar of compensation to workers (less people inured = more productive as a whole company)
All of the following would be included in the consequential loss,
except:
a. The reduction in revenues while closed.
b. The continuing expenses while closed.
c. The cost to repair the property.
d. The lost revenues after reopening because a firm’s buyer has gone elsewhere for its product
the cost to repair the property (this is a direct cost)
concentration of values =
big group of assets together
- all top executives fly on one plane
- 80,000 at camp randall for game day
how to calculate consequential loss
change in revenues - change in expenses
ex: you are missing out on $65,000 of revenues while closed (you now make $0) but you still pay $15,000 in expenses (when open its $50,000)
Change in rev= 0-65,000 = -65,000
change in exp= 15,000- 50,000 = -35,000
cons. loss = -65,000 - -35,000 = -30,000
what does reasonableness encourage
safety- you don’t need to worry about this if your only goal is to compensate the injured party
What factors would you consider in determining an appropriate value for UW-Madison’s property
exposures?
FUTURE EXPENSES
-how much to repair/replace?
Why do risk managers designate “net income” or “consequential” exposures separately from all other
exposures, even though all negative consequences to exposures affect net income
the are difficult to estimate and easy to underestimate ongoing effects
defenses available when sued for product liability
product being used not as intended
assumption of risk
comparative negligence
contributory negligence
