Chapter 14 - Risk Management Questions

3. Explain the strategies business experts advise for businesses to reduce international business risk.

Business exxperts recommend three strategies. First, carry out business in many countries - this will minimize and/or offset financial loss in the case of bad performance in a single market. Next, offer a range of products. This way, reduced sales of one item will not mean complete failure for the company. Third, involve local business partners in business decisions and activities. An agreement between a global company and local businesses can help foster a better relationship. Finally, employ local management in key positions. Locals know the culture and how to navigate the cultural, social, and political landscape.

For this risk, you can reduce or eliminate losses by actions that you take.

Controllable risk

What is the term that refers to the illegal use of patents, trademarks, and copyrights?

Counterfeiting

The three categories include personal risk, property risk, and liability risk.

Economic risk

2. Define economic risk, and explain the three categories.

Economic risks are risks that can result in financial loss. There are three categories: personal risk, property risk, and liability risk. Personal risk can result in personal losses such as health and personal well-being. Property risk can lead to loss of personal or business property including money, vehicles, and buildings. A liability risk relates to harm or injury of other people or their property because of your actions.

Many people face the risk, and the cost of possible losses can be predicted.

Insurable risk.

_________ is a common form of protection against risk.

Insurance

1. Explain how insurance companies are able to make a profit.

Insurance companies first collect premiums. These premiums go into a fund which helps to pay for claims. Since not all policyholders will need claims, all claims will be covered, and the excess money from the fund will be invested in order to make a profit.

A ______ agrees to take on risks and pay for losses if they occur.

Insurer

Risk that relates to harm or injury to others or their property is what kind of risk?

Liability risk

Does an independent insurance agent sell policies written by only one company or multiple companies?

Multiple companies.

Is the amount the polcy holder pays for insurance coverage the claim?

NO.

You may be inconvenienced, but you will not incur financial impact.

Non-economic risk

The person or company buying an insurance policy is the ________________.

Policyholder

A tornado, blizzard, or flood is an example of this type of risk.

Pure risk

Intellectual property includes _______, ______, _____, and ______.

Software, music, books, and movies.

The risk offers either the chance to gain or lose.

Speculative risk.

A ________ is a name or symbol that identifies a company's product.

Trademark.

True or false: Worker's compensation is insurance paid to employees injured on the job.

True.

In this risk, you can not reduce risk by the actions you take.

Uncontrollable risk.

This risk is uncommon, and impossible to predict.

Uninsurable risk.

A _____________ ____ can result in personal losses such as health and well-being.

personal risk

The possibility of incurring a loss is a ____.

risk.