Chapter 16: Small Business Protection: Risk Management and Insurance

Which of the following are strategies to minimize a business loss if the event that leads to the loss does occur? (Check all that apply.)

Making sure that valuable assets are physically secure Preparing specific plans and arrangements to handle foreseeable events Creating and enforcing an appropriate code of conduct for business owners and employees

Which of the following are strategies to minimize the likelihood and magnitude of a business loss?

The business should minimize the amount of the loss by making sure valuable assets are secure. The business should minimize the probability of the occurrence of an event that leads to the loss. The business should minimize the amount of the loss should the loss occur.

Buyout insurance is insurance that

provides money to business owners to buy the shares of any deceased owner from that owner's heirs.

Business ___ is the probability that the future state of a business will be less successful than planned, resulting in the loss of value of business assets.

risk

Loss of key employees

A critical employee becoming disabled

Which of the following is a contract necessity that functions to prevent property owners from intentionally under-insuring their properties?

Co-insurance

______ is a contract between two or more parties in which one party agrees, for a fee, to assume the risk of another.

Insurance

Which of the following statements about insurance are correct? (Check all that apply.)

Insurance coverage is either not available or excessively expensive for common events. Not all risks are insurable. Insurance provides a benefit by requiring a relatively small fee compared to the amount of loss that is possible.

The activities that make up oversight include which of the following? (Check all that apply.)

Asking questions. Assessing and challenging answers. Listening.

Which of the following statements about managing the risk of an employee violating government regulations are correct? (Check all that apply.)

Business are financially responsible for employees who violate regulations. Ignorance of the regulation in question is not an acceptable excuse. Being proactive is the best way to avoid violating a regulation.

______ insurance is insurance that provides money to business owners to buy the shares of any deceased owner from that owner's heirs.

Buyout

______ insurance covers losses to business property from fire, storm, vandalism, and theft.

Commercial property

______ is a type of internal control that separates the physical control of an asset from the person accounting for that asset.

Separation of duties

Which of the following are considered in calculating the cost of property insurance? (Check all that apply.)

The co-insurance amount required. The policy's loss limits. The deductible amount. The property's insurable value

Employee theft

Using company resources for making personal items

A surety bond

pays a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

Employers have been held harmless for their employees violating regulations when they can provide they have taken which of the following steps? (Check all that apply.)

Have a written policy that has been provided to each employee. Conducted employee and management training concerning those policies. Have quickly acted when notified of a complaint.

Which of the following are one of the five protected classes under the Equal Employment Opportunity Commission?

Race Color Religion

Which of the following is an agency that is responsible for enforcing the protection of employees in the workplace?

The Occupational Safety and Health Administration

Which of the following statements regarding the economic activities of local, state, and federal governments are correct?

They partner with businesses through programs that reduce the amount of risk they face.

Which of the following statements regarding government regulations are correct?

Violation of some regulations is inevitable because of the complex, ambiguous, and contradictory nature of the regulations. Workplace regulation has increased. Keeping up with regulatory requirements on average costs small businesses about $12,000 per employee.

The ______ value is the amount of an asset for which a company will write an insurance policy.

insurable

Which of the following are true of a properly conducted and independent internal audit? (Check all that apply.)

It gives an analysis of the operational and financial performance of a company. It gives an assessment of a company's overall level of business risk.

Identify the true statements about a properly conducted and independent internal audit. (Check all that apply.)

It gives an objective assessment of a company's risk control structure. It gives a structured evaluation of a business's processes and controls.

Which of the following are true of a properly conducted and independent internal audit? (Check all that apply.)

It gives an objective assessment of a company's risk control structure. It gives a structured evaluation of a business's processes and controls.

Which of the following statements about the equal employment opportunity commission (EEOC) are correct? (Check all that apply.)

Its authority was enhanced by the passage of several acts including the 1990 Americans with Disabilities Act. Its rules are very complex, which makes compliance difficult for businesses of all sizes. Its scope has grown since it was founded in 1964 to protect five classes: race, color, religion, sex, or national origin.

employees are those whose experience and skills are critical to the success of a business.

Key

In the context of managing business risk resulting from events involving personnel, ______ is a set of rules and procedures that work to limit the opportunity for employee theft or malfeasance.

internal control

Employee ___is the misappropriation of business property by employees of that business.

theft

Which of the following statements about insurable value are correct? (Check all that apply.)

Not all the value of a property has insurable value. The value of land, excavation, and basements is not insurable. It is the amount of an asset for which a company will write an insurance policy.

Which of the following statements regarding the loss of key employees are correct?

The loss of a key employee is a critical risk for small businesses. Competitors often poach key employees because of their experience and knowledge. A constant risk is that a key employee is often tempted to become a competitor.

Which of the following are risks that arise from customers and others? (Check all that apply.)

The risk that a customer will not pay a business for the product or service. Injuries suffered while on the property. Damage or injury that is cause during the use of a business' products.

A contract stipulation that requires a policyholder to carry insurance in an amount equal to a stated minimum percentage of the market value of the property insured is called ______.

co-insurance

Which of the following statements are what business owners should to ensure that an audit meets their goals? (Check all that apply.)

Provide sufficient authority to the auditor to ensure that the audits goals can be accomplished. Establish that the owner and the board have the final authority to review and approve the audit plan. Write an engagement agreement that clearly establishes the scope of work to be done. Meet privately with the internal auditor.

A(n) ______ is an amount of loss that will not be paid by an insurance company. Multiple choice question.

deductible

A contract stipulation that requires a policyholder to carry insurance in an amount equal to a stated minimum percentage of the market value of the property insured is called

co-insurance

Violation of government regulations

Failing to provide required accommodations for employees with disabilities

A______ is an agreement between two or more entities to pool resources in order to complete a project.

joint venture

Identify the main types of business risk related to events involving personnel of a business. (Check all that apply.)

Employee theft Loss of crucial employees Breach of government regulations

Which of the following statements about separation of duties are correct? (Check all that apply.)

Employees are the second largest source of business theft after shoplifters. It is a core management technique to safeguard money or other valuable business assets. Business owners have more difficulty stopping two or more employees who work together to steal from the firm.

Which of the following are commonly identified sources of business risk? (Check all that apply.)

Natural disasters. Loss or harm due to the use of a business' product or service. Business property theft. Customers not paying debts. Employee injuries and illnesses suffered because of their employment.

True or false: Small businesses spend more per employee to file and keep up with all the regulatory requirements than larger businesses.

This is true. Small businesses on average spend twice as much per employee than large companies.

A ______ is an agreement between two or more entities to pool resources in order to complete a project.

joint venture

Which of the following statements about fidelity bonds are correct? (Check all that apply.)

They are also called dishonesty bonds. These bonds have a scope of coverage, exclusions, and types of dishonesty not covered. They should be considered for employees who have access to large amounts of cash and other valuable assets.

Which of the following statements about joint ventures are correct? (Check all that apply.)

They are used to lower an individual company's risk. Each business keeps its own identity and continues to conduct its own business separately. There are a number of tax benefits to participants.

A ______ bond pays a specified amount in the event that the entity bonded fails to comply with specified contractual requirements.

surety

Which of the following statements about customer-related risks are correct? (Check all that apply.)

Injuries that occur at a business may or may not be the firm's fault, but are often a business' liability. Damages or injuries that occur during the use of a business' products is referred to as product liability. A business may be liable for injuries that are a result of trespassing or a criminal act such as a robbery.

Which of the following are strategies to minimize a business loss if the event that leads to the loss does occur? (Check all that apply.)

Making sure that valuable assets are physically secure Creating and enforcing an appropriate code of conduct for business owners and employees Preparing specific plans and arrangements to handle foreseeable events

Which of the following statements regarding coverages are correct? (Check all that apply.)

They are required by law to provide social protection from harm caused to employees, customers, and uninvolved individuals. General liability, product liability, a malpractice coverages are examples of coverages that are not required, but can be purchased. Workers' compensation, unemployment insurance, and vehicle liability are examples of coverages.

In the context of managing business risk resulting from events involving personnel, which of the following statements regarding internal control are correct?

Internal control is about setting up policies and procedures that work to make dishonesty difficult. Internal control involves separation of the duties of maintaining the security of assets from that of maintaining records of those assets.

Which of the following statements regarding employee theft are correct?

Ninety-five percent of small business face some sort of loss. The most common type of theft is pilfering small value items like office supplies or hand tools. It may involve direct stealing of money or other assets of the business.

______ bonds repay employers for losses caused by dishonest or negligent employees.

Fidelity

Which of the following is true of the Occupational Safety and Health Administration (OSHA)?

It is one of three agencies whose business regulations are most likely to create compliance issues for small businesses.

A ______ is a contractual provision of an insurance policy that specifies what risks the insurance company is assuming.

coverage