To what extent should a firms exposure to physical risk be taken into account in capital budgeting decisions?

How can the costs and benefits of risk management procedures be measured a) in the short run and b) in the long run?
2. “Risk identification is an underdeveloped art” Discuss and include an overview of risk identification aids and techniques in your answer.
3. To what extent should a firm’s exposure to physical risk be taken into account in capital budgeting decisions? How can this be achieved?
4. Provide an overview of the techniques available for risk managing a firm’s liability exposure.
5. To what extent can the use of probability distributions in risk management be used to remove the need for a genuine understanding of the perils and hazards faced by the firm?
6. You are the risk manager for a fleet of motor vehicles. Your usual insurer has just sent you a quote for next year’s insurance premium and you consider it to be too high.
(i) Explain the alternative risk management courses of action available to you, and
(ii) Explain the thought processes and analysis that should be undertaken in order to choose between the alternative courses of action.
(Note you are not required to be an expert in motor risks and insurance. Answer the question with reference to the general principles of risk management and common sense.)
7. How should a firm decide between risk retention and risk transfer (including partial risk transfer)
(i) if a captive insurer is not to be employed.
(ii) using a captive insurer.
8. Explain in detail how a risk manager can make optimal use of insurance as part of an overall risk management strategy.
9. (a) Explain the main sections of a firm’s “All risks” insurance policy, and
(b) Insurance contracts tend to be in “standardised” form. What factors could lead to them becoming more “tailor made”.
10. Explain how the decision to purchase insurance should be influenced by
(a) the structure of insurance markets
(b) the price of cover
(c) availability of intermediaries
(d) insurers’ underwriting policies
(e) insurers’ security and solvency.

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