{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

fm23 7 - 3 Demand risks are those associated with the...

Info icon This preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Mini Case: 23 - 8 c. What is corporate risk management? Why is it important to all firms? Answer: Corporate risk management is the management of unpredictable events that have adverse consequences for the firm. This function is very important to a firm since it involves reducing the consequences of risk to the point where there should be no significant adverse effects on the firm’s financial position. d. Risks that firms face can be categorized in many ways. Define the following types of risk: (1) speculative risks; (2) pure risks; (3) demand risks; (4) input risks; (5) financial risks; (6) property risks; (7) personnel risks; (8) environmental risks; (9) liability risks; and (10) insurable risks. Answer: 1. Speculative risks are those that offer the chance of a gain as well as a loss, such as buying an ownership share in a company. 2. Pure risks are those that only offer the prospect of losses, such as a product liability or malpractice lawsuit (from the defendant's standpoint).
Image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: 3. Demand risks are those associated with the demand for a firm's products or services, such as new products developed by competitors. 4. Input risks are those associated with a firm's input costs, including materials and labor. 5. Financial risks are those that result from financial transactions, such as interest rate and currency exchange rate risks. 6. Property risks are associated with destruction of a firm's productive assets, including the threat of fire, floods, and riots. 7. Personnel risks are risks that result from human actions, such as theft and fraud. 8. Environmental risks include those risks associated with polluting the environment. 9. Liability risks are connected with product, service, or employee liability, such as costs incurred as a result of improper actions by employees or damages resulting from defective products. 10. Insurable risks are those that typically can be covered by insurance....
View Full Document

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern