Deck 17: Risk Management, Insurance, and Crime Prevention

Question 1

Which of the following is a characteristic of a pure risk?

A) It cannot be analyzed statistically.
B) It is typically uninsurable.
C) It exists when the possibility of a loss is present but the possible extent of the loss is unknown.
D) It refers to the uncertainty as to whether a voluntarily undertaken activity will result in a gain or a loss.

Answer 1

C

Question 2

Which of the following is/are issued by insurers to guarantee that employees and others with whom the company transacts business are honest?

A) Fidelity bonds
B) Revenue bonds
C) Key person insurance
D) Business insurance

Answer 2

A

Question 3

Businesses use self-insurance primarily for _____.

A) risk avoidance
B) risk prevention
C) risk transfer
D) risk assumption

Answer 3

D

Question 4

Most property insurance contracts have a coinsurance provision to:

A) ensure reimbursement for the full amount of covered losses.
B) protect a business from losses resulting from the use of its product.
C) protect a small business from suits resulting from mistakes made by someone in a professional context.
D) facilitate the continuation of a business following the death of its owner.

Question 5

Insurance is an example of _____.

A) risk avoidance
B) risk prevention
C) risk transfer
D) loss control

Question 6

Coinsurance is usually used in which of the following types of insurance contracts?

A) Travel insurance contracts
B) Workers' compensation contracts
C) Property insurance contracts
D) Ransom insurance contracts

Question 7

Which of the following defines speculative risk?

A) It is the uncertainty that some unpredictable event will result in a loss.
B) It is the uncertainty that a voluntarily undertaken risk will result in a loss.
C) It is the refusal to undertake an activity when a chance taken seems too costly.
D) It is the possibility of a loss when the possible extent of the loss is unknown.

Question 8

_____ refers to setting aside funds to meet losses that are uncertain in size and frequency.

A) Risk avoidance
B) Risk prevention
C) Risk transfer
D) Risk assumption

Question 9

Which of the following defines risk avoidance?

A) It refers to the practice of refusing to undertake an activity when the risk seems too costly.
B) It refers to the practice of using various methods to reduce the possibility of a loss occurring.
C) It refers to the shifting of risks to someone outside the company.
D) It refers to the strategy of setting aside funds to meet losses.

Question 10

_____ refers to shifting a risk to someone outside the company.

A) Risk avoidance
B) Risk prevention
C) Risk transfer
D) Risk assumption

Question 11

Which of the following is covered by business insurance?

A) Health insurance of the employees
B) Loss from the use of a business's product
C) Economic loss to a business when a key employee dies
D) Loss to a business due to bankruptcy

Question 12

_____is the uncertainty that some unpredictable event will result in a loss.

A) Secondary risk
B) Speculative risk
C) Pure risk
D) Voluntary risk

Question 13

_____ refers to using various methods to reduce the possibility of a loss occurring.

A) Risk avoidance
B) Risk prevention
C) Risk transfer
D) Risk assumption

Question 14

_____ provide(s) protection against the failure of a contractor to fulfill contractual obligations.

A) Fidelity bonds
B) Key person insurance
C) Surety bonds
D) Business insurance

Question 15

Which of the following is true of casualty insurance?

A) It does not provide protection against burglary, theft, and robbery.
B) It excludes health and accident insurance.
C) It refers to the setting aside funds to meet losses that are uncertain in size and frequency.
D) It consists of automobile insurance.

Question 16

Which of the following provisions requires policyholders to buy insurance in an amount equal to a specified percentage of the property value?

A) Prize indemnity insurance provision
B) Coinsurance provision
C) Self-insurance provision
D) Basic insurance provision

Question 17

_____ provides protection for an employee's estate when he or she dies while still in the income-producing years.

A) Workers' compensation policy
B) Life insurance
C) Health insurance
D) Business insurance

Question 18

Which of the following defines risk management?

A) It is the process of conserving earning power and assets by minimizing the shock from losses.
B) It is the process of managing an organization's workforce.
C) It is the process of increasing productivity by strategically managing the workflow.
D) It is the process of measuring employee performance in organizations.

Question 19

_____ protects a business from losses due to suits resulting from mistakes made or bad advice given by someone in an official context.

A) Professional liability insurance
B) Workers' compensation policy
C) Business interruption coverage
D) Surety bond

Question 20

Rob Bateman, the owner of a small business, bought a basic fire insurance cover to insure his business against losses caused by accidental fires. Bateman's fire insurance policy can additionally be supplemented by a(n) _____ as an insurance against explosion, smoke damage, and windstorms.

A) professional liability insurance
B) fidelity bond
C) surety bond
D) extended-coverage endorsement

Question 21

Self-insurance is usually impractical for very small businesses.

Question 22

Risk avoidance entails the use of various methods aimed at reducing the probability that a given event will occur.

Question 23

Which of the following measures can be used to enhance document security?

A) Maintaining backups for records
B) Allowing only senior executives to take home confidential business records
C) Instituting flexible security policies
D) Discouraging employees to work from remote destinations

Question 24

Which of the following constitutes a white-collar crime?

A) Kidnapping
B) Shoplifting
C) Physically assaulting one's neighbor
D) Falsifying accounts

Question 25

A liability judgment against an individual constitutes a pure risk.

Question 26

Sale of proprietary information is an example of _____.

A) a blue-collar crime
B) risk transfer
C) a white-collar crime
D) risk avoidance

Question 27

The best-known form of risk transfer is insurance.

Question 28

_____ allows retailers to demand payment of shoplifters or their parents for the items taken.

A) Social justice
B) Civil restitution
C) Redistributive taxation
D) Organizational justice

Question 29

Risk management is the process of increasing productivity by strategically managing the workflow.

Question 30

Which of the following constitutes shoplifting?

A) Sally, a young woman, stole an expensive brooch from a departmental store and hid it in her handbag.
B) Robert, a habitual offender, set fire to a shop owned by his rival's family.
C) Gina, an accountant, embezzled funds from her company's account.
D) Mark, a teenager, stole money from his mother's purse for buying cigarettes.

Question 31

The possibility facing a small business that it will be unprofitable is an insurable risk.

Question 32

Pure risk always exists when the possibility of a loss is present but the possible extent of the loss is unknown.

Question 33

Retailers sometimes refer to losses from both theft by outsiders and theft by employees as _____.

A) fidelity
B) restitution
C) kleptomania
D) shrinkage

Question 34

An extended-coverage endorsement multiplies the liability of small businesses.

Question 35

Which of the following is an effective technique for minimizing theft?

A) Reduce the number of electronic noise activators.
B) Install wide-angle and one-way mirrors to observe employee or customer behavior.
C) Schedule higher inventory levels on weekends.
D) Institute a flatter organizational structure and replace the status quo.

Question 36

White-collar crimes are primarily committed by _____.

A) managerial employees
B) factory workers
C) habitual shoplifters
D) laborers

Question 37

When a business owner buys insurance, he or she is trading a potentially large but uncertain loss for a small but certain one.

Question 38

_____ helps insure against employee fraud or theft.

A) Fidelity bonding
B) Coinsurance
C) Surety bonding
D) Casualty insurance

Question 39

Coinsurance exempts policyholders from paying the insurance premium.

Question 40

Which of the following is an effective way of minimizing white-collar crime?

A) Conducting audits of sales transaction data
B) Curtailing corporate crime prosecution budgets
C) Restricting disclosure
D) Terminating the pension system

Question 41

Purchasing materials for just-in-time delivery increases the risk of theft.

Question 42

You can reduce the costs of insurance by raising your deductible.

Question 43

Dogs are considered to be effective deterrents against armed robbers.

Question 44

Professional liability insurance is also known as malpractice insurance.

Question 45

Key person insurance is rarely used in small firms.

Question 46

Criminal acts have forced not only small but even large businesses into insolvency.

Question 47

In high-crime neighborhoods, many businesses use tough, shock-resistant transparent materials in their windows instead of glass as a security measure.

Question 48

Surety bonds provide protection against the failure of a contractor to fulfill contractual obligations.

Question 49

In practice, the premiums of mutual companies and reciprocals are substantially lower than those of profit-making companies.

Question 50

Insurance companies treat large and small businesses alike.

Question 51

Health insurance is less frequently used in small firms.

Question 52

Theft by employees is referred to as shoplifting.

Question 53

It is impossible to identify the areas that are particularly susceptible to crime.

Question 54

Independent insurance agents represent more than one insurance company.

Question 55

Making daily cash deposits and varying the deposit time from day to day are highly recommended to keep the probability of armed robberies down.

Question 56

Indirect losses are frequently more severe in their eventual cost than are direct losses.

Question 57

Key person insurance insures the lives of important employees.

Question 58

An offer of a new policy to replace one that is flawed implies a red flag in the process of choosing an insurer.

Question 59

Locations that afford easy access and relatively secure escape routes are particularly invulnerable to armed robberies.

Question 60

Premiums for product liability coverage have been declining steadily over the last several years.

Question 61

Define white collar crime. What are the different ways to minimize white collar crimes?

Question 62

List some measures that small business owners can take to prevent crime and reduce workplace violence.

Question 63

What are the consequences of employee theft? What are the different techniques that retailers can use to help prevent theft?

Question 64

What are the different types of insurances that a small business owner mostly needs?

Question 65

What are the different ways of coping with risk?

Question 66

Describe the two types of risks that small business owners face.

Question 67

What is business insurance and what is its importance?

Question 68

List some red flags to look for when choosing an insurer.

Question 69

What should owners of small businesses do to ensure the safety of their workers?

Question 70

What is risk management? How can it help a firm?