M6 Activity 1 Case Application [PDF]

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M6 Activity 1: Case Application



1. Briefly describe the steps in the risk management process that should be followed by the risk manager of City Bus. 



Identify Loss Exposures – it involves a painstaking review of all potential losses



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Measure and Analyze the Loss Exposure- it includes determining the loss frequency, and loss severity of each loss, and determining the maximum possible loss and the probable maximum loss



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Select the Appropriate Combination of Techniques for Treating the Loss Exposures- it utilize risk control which the techniques is to reduce the frequency or severity of the losses and it also utilize the financing risk which the techniques provides the funding of the losses



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Implement and Monitor the Risk Management Program- it have a risk management policy statement and a risk management manual, and it ensure that everyone that is involved in a company is aware of these regulations and policies



2. Identify the major loss exposure faced by City Bus. 



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Business Loss Exposure - Since the firm faces competition from two larger bus companies that operate in the same area, with that the City Bus will have a business income loss exposure Property Loss Exposure – the City Bus face a damage to any three garages and will encounter a damage in any 50 buses and have a mechanical issues Liability Loss Exposure – the City Bus might face traffic accidents with the buses Crime Loss Exposure – the City Bus might face a loss when it comes to theft in garages or buses or even with driver of the bus



3. Then identified in (b) identify a risk management technique or combination of techniques that could be used to handle the exposure. The following is a risk management technique that the City Bus could be used to handle the exposure:    Risk Control  Loss Prevention  Loss Reduction



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Risk Financing  Retention  Insurance



4. Describe several sources of funds for paying losses if retention is used in the risk management program.   



Current Net Income- the City Bus Corporation can pay losses out its net income Line of Credit- the City Bus can apply for a line of credit and can use the line of credit from a bank or any financial institutions that can pay the losses incurred Funded or unfunded reserves- the City Bus can establish an unfunded reserve wherein it is responsible for taking losses into budget and will pay out by the net income, or the City Bus may set aside a funded reserve for expected and unexpected losses



5. Identify other departments in City Bus that would also be involved in the risk management program.  



Production Department- it involves with the maintenance of the buses and provide quality control of the parts for the buses Accounting and Finance Department- it provides information on insurance and the taxes of funds, it ensure that the budgets and profits is lineup, and they can be able to calculate the outcome losses on City Bus Corporation’s income