Cpcu 510 - Assignment 4

Front 1

Avoidance

Back 1

A technique of risk control based on stopping or starting an activity, thereby eliminating the possibility of future loss from the activity.

Front 2

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Business Continuity Management
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Back 2

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A 6-step method for identifying threats to a business and then managing them in a systematic way so that business will not be interrupted.
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Front 3

Disaster Recovery Plan

Back 3

A post-loss plan to ensure key resources and backup plans are available to support continued operation of the business in case of emergency.

Front 4

Diversification

Back 4

A risk control method that spreads loss exposures across several markets, products, projects, or regions.

Front 5

Duplication

Back 5

A risk control method that keeps backups or copies of an organization's crucial information or property in reserve.

Front 6

Life Safety

Back 6

The aspect of fire safety that deals with the minimum building construction, design, maintenance, and operation requirements needed to give building occupants a safe exit during a fire.

Front 7

Loss Prevention

Back 7

A technique of risk control that reduces the frequency of a particular loss.

Front 8

Loss reduction

Back 8

A technique of risk control that reduces the severity of a particular loss.

Front 9

Risk control

Back 9

A conscious decision not to act in order to reduce the frequency, severity, or unpredictability of losses.

Front 10

Separation

Back 10

A technique of risk control that disperses a particular asset or operation over several locations while regularly relying on that asset or activity as part of the organization's resources.

Front 11

A given risk control measure is risk control only with respect to _____________.

Give an example

Back 11

One or more SPECIFIED exposures.
Example: Installing fire-supression sprinklers may control a fire but will not control embezzlement

Front 12

Action that is a good risk control for one exposure may _____________________.

Give an example

Back 12

Increase the frequency or severity of losses from another exposure
Example: Equipping employees with portable oxygen tanks increases the chances for fire associated with storing oxygen under pressure.

Front 13

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What are the 6 main techniques of Risk control?
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Back 13

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1. Avoidance
2. Loss prevention (frequency)
3. Loss reduction (severity)
4. Separation
5. Duplication
6. Diversification
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Front 14

What is the only complete risk management technique that requires no further risk control or risk financing measures?

Back 14

Avoidance

Front 15

Applications of which risk management technique are limited, and why?

Back 15

Avoidance
*Just being an organization creates loss exposures that can't be avoided (ex: you avoid property loss only by avoiding property ownersip)
*Certain narrow exposures can be avoided, but avoiding one loss exposure can create another

Front 16

You should consider avoidance as a risk control method only when...

Back 16

the expected value of the losses from an activity outweigh the expected benefits.

Front 17

Loss prevention may not affect ____________.

Back 17

Loss severity

Front 18

What is the basis of current risk control theory?

Back 18

Heinrich's domino theory. It states that workplace accidents are the result of a chain of factors, and removing one factor can prevent injury

Front 19

What are the 5 factors (dominoes) of Henrich's theory?

Back 19

1. Ancestry and social environment
2. Personal fault
3. Unsafe act/hazard
4. Accident
5. Injury resulting from accident

Front 20

What are the 2 categories of Loss reduction?

Back 20

1. Pre-loss measures - applied before loss, reduces the amount of property affected by an event. Can also reduce loss frequency (example: driving an ambulance at a lower speed in nonemergencies)
2. Post-loss measures - after loss, stops spread of loss. Focus on emergency procedure, legal defense and rehab activities (ex: fire detection system). Disaster Recovery plans come into play here.

Front 21

Which risk control method: Separation or Duplication, is more practical in terms of cost? Why?

Back 21

Separation is more practical in terms of cost because units are kept in daily use, not on standby

Front 22

Unlike other risk control techniques that deal with hazard risks, _____________ deals mainly with business risk.

Back 22

Diversification

Front 23

4 key risk control goals

Back 23

Memory Aid: ICEE
1. Implement effective, efficient risk control methods
2. Comply with legal requirements
3. Encourage life safety
4. Ensure business continuity

Front 24

How do we decide which risk control methods are efficient?

Back 24

Efficient measures are those that cost the least and are still effective.

Front 25

List the disadvantages of using cash flow analysis when selecting risk control measures

Back 25

1. It's hard to estimate future cash flows
2. Assumptions made are sometimes weak
3. Non-$$ related goals might not be considered

Front 26

Business continuity management should meet what 2 primary risk management program post-loss goals?

Back 26

1. Survival
2. Continuity of operations

Front 27

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Discuss externality
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Back 27

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A risk control measure that controls one type of loss exposure may affect the frequency and severity of other loss exposures. This is called externality.
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Front 28

Applying Risk control techniques to specific loss exposures (table)

Back 28

Front 29

Any risk control technique that controls any loss exposure will also indirectly affect ____________.

Back 29

Net income loss exposure

Front 30

What are some loss prevention methods that can be applied to control personnel loss exposures?

Back 30

Education
Training
Safety

Front 31

Positive externality

Back 31

When a risk control measure for one loss exposure reduces the severity or frequency of another loss exposure (ex: random drug testing to reduce frequency of employee injury may also reduce workplace theft)

Front 32

Negative externality

Back 32

When a risk control measure for one loss exposure increases the severity or frequency for another loss exposure (ex: installing a sprinkler system can reduce fire loss but increase water dmg losses if they leak)

Front 33

What types of risk control measures can apply to property loss exposures?

Back 33

All...because there are so many different type s of property.

Front 34

What are the 4 main types of loss exposures?

Back 34

1. Property (tangible/intangible)
2. Personnel
3. Liability
4. Net income

Front 35

In commercial properties, what method is used to analyze property loss exposures?

Back 35

COPE method:
*Construction
*Occupancy
*Protection
*Environment

Front 36

What types of risk control measures can apply to net income loss exposures?

Back 36

*Separation and duplication will directly reduce severity of net income losses
*Because net income loss exposures are an indirect result of other types of loss exposures, the use of any risk control measures will indirectly reduce net income loss exposures

Front 37

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What are the 6 steps of Business Continuity management?
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Back 37

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*Count The Enemy Dead, Do More!*
1. ID Critical functions
2. ID Threats to these functions
3. Evaluate the effect of the threats on the functions
4. Develop a business continuity strategy
5. Develop a business continuity plan
6. Monitor the process and revise it as necessary
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Front 38

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What are the key attributes of a good business continuity plan?
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Back 38

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*Clear and easy to understand
*Copies of plan given to all necessary personnel
*Training and drills shoudl be conducted
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Front 39

Business continuity plans typically include these 6 areas

Back 39

1. Strategy to manage the crisis
2. Rules and duties of key personnel
3. Steps to prevent further damage
4. Emergency plan to deal with life and safety issues
5. Business recovery plan to deal with property, process and product loss
6. Access to counseling

Front 40

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What are the risk control techniquest for liability losses?
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Back 40

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1. Avoid the activity that creates the loss exposure
2. Loss Prevention - decrease likelihood of loss occurring
3. Loss reduction - minimize effects.
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Front 41

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Positive Externality
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Back 41

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When a risk control measure implemented for one loss exposure reduces the frequency or severity related to another loss exposure
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Front 42

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Negative Externality
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Back 42

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When a risk control measure implemented for one loss exposure increases the frequency or severity related to another loss exposure
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