FIN 502 Lecture : CHAPTER 9 risk management.docx
Document Summary
Speculative risk: loss and gain, but in uncertain amounts: risks that you choose to accept, rather than those that you encounter simply because of your circumstances. Pure risk: possibility of loss only: risks that happen to us without having made a conscious choice to seek them out. Step 1: identify the risks: group risk into three general categories: personal or life and health; property; and liability to other persons for our actions that affect them, torts: legal wrongs or injuries one person causes another. Common law is the part of the law determined by court decision over a long period of time, rather than by statute. Limited liability (for limited corporations) means investors are not responsible beyond the amount of money paid for the investment. Unlimited liability (for unincorporated businesses) are personally liable without limit for all losses they cause. Cost of finding other accommodations, including hotel bills. Repair or replacement, cost of temporary replacement rental.
