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LAW 122 (625)
Chapter 1

Chapter 1
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Department
Law and Business
Course
LAW 122
Professor
Avi Weisman
Semester
Fall

Description
th Monday September 122011 Chapter 1 Risk ManagementSources of Law Why Study Law Why Study Law as Business StudentsGoal of business is to make moneyKnowledge of Lawleads to greater risk management reduces potential costs increases potential profitsAll Business Choices have Legal ConsequencesLegal Education Plays a Critical Role in Risk ManagementBasic understanding of the law makes you a better personLaw can both hurt and help youRisk ManagementWhat Is Risk ManagementThe process of identifying evaluating and responding to the possibility of harmful events3 steps to Risk Management 1 Identification recognition of legal risks can we be held liable for doing something wrong 2 Evaluation assessment of legal risks what are the chances of something going wrong 3 Response reaction to legal risks what are we going to do about itNearly every business decision creates some risk Risk StrategiesAvoidancenot engage in risky business activity not sell certain product or service ie cars with exploding fuel tanksSome risks are so serious that they should be avoided altogetherReductionreduce occurrence of risk by modifying business practices wiping floor if wetSome risks can be reduced to an acceptable levelShiftingshift risk to another party through contract or through insurance policy purchase insurance for car accident If a risk cannot be avoided or reduced it may be shifted onto another partyAcceptancesometimes appropriate for business to accept the risk lucrative contract Examples of Risk ManagementInsurance liability insuranceproperty insuranceInsurance is a contract in which one party agrees in exchange for a price to payif another company suffers a lossExclusion and Limitation clauses contractual terms that exclude liability for certain types of actslosses or that limit the amount of compensation availableBusiness makesby selling goods or services those sales are created by contracts and those contracts are often exclusion of limitationsIncorporation limited liability directors and shareholders are not usually liable for debts of the companyIn order to avoid some risks many business are set up as corporationscompaniesMost significant benefit of incorporation is limited liability
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