Lecture 02 - Risk ID Cases - Major Types of Business Risk...

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Unformatted text preview: Major Types of Business Risk Figure 1-1 Major Types of Business Risk Output Price Risk Input Price Risk Commodity Price Risk Exchange Rate Risk Interest Rate Risk Price Risk Credit Risk Damage to Assets Legal Liability Worker Injury Employee Benefits Pure Risk Price Risk and Credit Risk Price risk Risk of financial losses due to fluctuation in market prices Inputs Outputs Credit risk Risk of financial losses due to parties defaulting on payments owed More generally, counterparty risk = risk of contracting partners defaulting on contractual promises Pure Risk Damage to assets Risk of loss of value of business assets due to physical damage or theft Ownership, creditor or contract interests in property Loss of value, loss of use Legal liability Risk of having to pay financial damages for harms experienced by another Determined by courts legally binding Tort law: harms to someone with whom one does not have a contract Worker injury is a special case Employee Benefits Risk of death, illness, disability or superannuation of employees Determined by employee benefits plans Business Interruption Risk Time Earnings t1 t2 t1=date of loss; t2=date resume operations Catastrophe Planning...
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This note was uploaded on 05/07/2009 for the course PAM 4230 taught by Professor Tennyson during the Spring '07 term at Cornell University (Engineering School).

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Lecture 02 - Risk ID Cases - Major Types of Business Risk...

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