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Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Assignment 1

Question 1 - Answer A) Identifying loss exposures •

As noted we have established that our concern is with losses to the library’s personal tangible property, with a focus on destruction (fire, vandalism, flood, quake, etc) and theft.

We really have two concerns 1) tangible property on site & 2) tangible property off site (given the nature of this risk).

There may be some questions dealing with intangible personal property. The library may have agreements in place with corporations allowing the limited distribution of certain information in a controlled setting.

Creating a risk assessment questionnaire - if structured properly will actually help to establish any gaps when it comes to tangible and intangible property questions.

Loss history - of the library will help to provide data dealing with on site and off issues. (This could include outstanding items that have never been returned, fires, sprinkler systems going off, sewer back up of a basement, etc )

Financial statements - for nonprofit organization may not provide information that is critical to property losses. However a quick review may not hurt

Other documents – Such things as inventory lists, computer data base system software (may bring up some coding or inputting issues dealing with both human error or theft concerns), current contracts with suppliers (may show that the library could be held responsible for certain property loaned to them i.e. books, etc)

Flow Charts – May help in dealing with singing out and returning of materials showing where possible human error could cause concern on missed filed books. Not looking over returned material for damages.

Personal Inspection – This would be a must for the risk manager to get a full understanding of security, water damage, fire, staffing issues. Such thing as adjacent exposures could help give risk manager a better understanding of the exposures.

Analyzing Loss Exposure •

Loss Frequency – given the high volume of materials signed out to the public theft would be the largest exposure. Using the Law of Large Numbers one could come up with some kind of estimate. To drill it down even further one would have to review what type of materials are not being returned (CD’s, certain type of books) This would also apply to items stolen direct from site.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: •

Loss Severity – Are theft losses just part of doing business? How does it impact the over all financials? A fire or water loss would have a bigger impact. One would have to break down both MPL & PML. The Prouty Approach is a good way of figuring out what is high priority and what is not.

Timing & Dollar Losses – Given the type of risk the local municipality would have a portion of the risk self-insured and a portion transferred to insurance policy. There would be a number of factors on timing and amount of dollars paid out. Such thing as, is it considered an essential service, can the public wait, can property be saved, etc. (however when dealing with property losses things are usually quickly settled, unlike liability issues)

Examining the Feasibility •

Avoidance – There maybe certain activities that could be avoided that would eliminate losses. (Maybe never allow material to be signed out unless all contact information in the system is correct) (Never allow certain material to be taken out of a certain area)

Loss Prevention – Make sure that all fire alarm and burglar systems are tested on a regular basis.

Loss Reduction – Have the sprinkler system converted from water to powder system. In case of a fire the system could contain the fire but at the same time not damage books, etc throughout the rest of the building.

Duplication – If allowed have all high valued materials copied and the originals stored either off site or in a well secured location in the building.

Risk Financing – As mentioned before this type of risk would require both self-insurance techniques and transfer (buying insurance)

Once the above has been reviewed, budgets must be reviewed, general public interests, setting deductible, limits, procedures, training and an ongoing monitoring program set up.

Question 1 - Answer B) •

The question that must be asked is who are the key personnel that if lost would have a major financial impact on the football team. Also what are the circumstances dealing with the lost personnel.

“Organizations have a fundamental goal of survival.” Page 1.4

Out this fundamental goal Continuity of Operations plays a major factor in dealing with personnel losses. Profitability, Earnings, social responsibility and growth are all linked to having the right people in place.

So we have identified the loss exposure now we must break it down by analyzing the exposures.

Risk questionnaire – A well-rounded questionnaire for personnel to answer could help establish each employee’s role and function within the team.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: •

Loss Histories – Could review how the team handled personnel losses in the past. Either through death, retirement, sickness or resignation.

Financial Statements – There could be a large impact to the balance sheet should a key person leave the organization. One scenario to review is how tkt sales respond when a high profiled player or manager leaves the team. There may also be private loans etc on the books that could generate a negative impact to the bottom line.

Other records or Documents – This method is a very important. It is common for sports teams to negotiate individual contracts with players, coaches and even managers. Each of these contracts should be reviewed with great detail. Example - if the team requires terminating a particular contract, such a contract could be structured in such a way that lumps sums of money must be paid out. This could hurt the team’s bottom line. There also could be certain media and endorsement deals that could be a joint partnership between a player and the team.

Flowcharts – This will help give the risk manager a visual of how certain critical issues may flow throughout the team. By allowing a review of the level authority for each individual will help to pin point key roles within the organization.

Personal Inspections – There could be some advantage to this method. Maybe by speaking to staff etc one could pick up on who gets things down and who is just a figurehead. For example you have a VP that really does nothing and is supported by a number of personnel who actually do the job. So if the VP was let go the impact might be minimal compared to the support staff

Outside Expertise – Given the type of risk and all the different complexities a number of specialized persons should be brought in. Lawyers, Accounts, Marketing & Media Relations, Medical Experts (dealing with players), etc. All of these people will help to provide a more in depth view of the loss of key personnel.

Analyzing Loss Exposure •

Loss Frequency – This could have a devastating affect on the team and revenue if people are quitting or injured on regular basis.

Loss Severity – MPL & PML are both linked to individual contracts and timing. Example: Tail end of the playoffs and your star(s) player(s) get hurt or has a major conflict with the coaching staff. MPL could be $100’s of Millions of dollars in lost TV and merchandise revenues. Flip side is that if your contracts are air tight to deal with such a scenario (more so conflict resolutions) you may have PML number already in place (a slush fund) if such a an incident occurs.

Examining the Feasibility •

Avoidance – Placing certain procedures in play. Like never letting top company officials, players or coaches all travel on the same plane or bus together. Have excellent doctors and training staff that has the authority to sideline a player because of injury.

Loss Prevention & Reduction – In this case providing a safe environment and excellent medical equipment for injured players. Create monetary incentives of key personnel so they do not leave.

Duplication – Have key personnel each aware of certain facts and plans should one of the leave, die, etc. (Should there be a board of directors this is where the information should be shared)

Risk Financing – Purchasing Insurance (like Key Man), setting up slush funds and structuring financial contracts with individuals that provide bonus etc.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Personnel risks are forever changing and in order to combat shock losses it is important to have a strong board of directors and well compensated top company officers.

Question 2 - Answer A) 1.

Slip & Falls (Liability)

B) Concerns dealing with premises liability for both the stadium and city parking lots. There are a number of factors that need to be reviewed when dealing with the stadium. Age of building, maintenance and up keep, size, open air or closed. Parking lot issues – lit at nite, pot holes, adequate signage Reviewing loss history, maintenance records, season schedule, weather history, personal inspection, etc should help to provide data that will give better understanding of the factors that could contribute to a potential loss. Example: If opened air stadium how many slip and falls have been reported when it is raining out? What procedures are in place to clean up excess water on stairs? Is the stadium located in northern part of North America? (Ice and snow issues). The concern with slip and falls is not the severity but the frequency and how the costs can start to add up very fast over the course of a season. Especially since the owners are also leasing the stadium to the University. Loss prevention, reduction and possible avoidance can all be used in combination. - Having high traffic areas coated with a slip resistive surface - Hiring a law firm to deal with small nuisance losses. Giving them the authority to settle up to a set dollar amount. - During certain weather conditions close down areas that are know to cause problem Risk financing techniques -

As noted above set up slush fund Purchase insurance for major losses Have both city and university confirm they carry CGL - Request to be added See if you can negotiate hold Harmless agreements

A) 2.

Liquor Liability & Products Completed Ops

B) Major concern here with both liquor and food products sold during both baseball and football events. Looking over financial statements will help to provide volume of products consumed. Example: Liquor sales are X dollars and say that Y was the attendance of the particular game. Taken into consideration weather conditions, night or day game, weekend, playoffs or regular season, university crowd, etc – You


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: could come up with average drinks per person. Not 100% accurate but provide you some idea of when your greatest exposure can take place. Of course other records such as police reports may also help to narrow down where the problems come from. Government stats on alcohol consumption of different age groups, etc can also provide insight. Both severity and frequency are concerns with this exposure. It is hard to cage what the MPL could be should a loss go to court. There is of course case law throughout Canada that could be reviewed to help give some idea on what the PML might be which in turn would allow one look at different risk financing techniques. Loss prevention, reduction and possible avoidance can all be used in combination. - Maybe only sell light beer and no spirits - Maybe make people buy beer tkts. Only selling two per individual. Have a special section for people to consume drinks (nothing in the stands) - Do not sell any beer during university games Risk financing techniques -

Set up slush fund Purchase liquor liability insurance Have University confirm they carry liquor liability See if you can negotiate hold Harmless agreements Is the beer company willing to contribute monies to the slush fund

There are a number of other factors that one must take into consideration for this type of exposure. Does the stadium have local police officers at games, are security people contracted out or staff (if staff do they have proper training). Does the liquor liability insurance policy provide forced ejection?

A) 3.

Personnel Loss (Marketing VP)

B) As noted in question 1, b, there are many key personnel that help make up an organization. All personnel are important, however there are some that play a larger role in keeping the company moving ahead. For this scenario will focus on the marketing VP. Questionnaires will have to provide an overview of the VP’s job and what it he/she responsibilities are. It should provide a more detailed analysis of what her/she does on a day to day basis. This will give the risk manager insight into the VP’s connections with the community leaders and public. (If excellent relationships hard to place a dollar value on it) Financial Statements, other records, flowcharts can all help to establish the VP’s value and the impact on the organization if he/she were to be lost. Examples: Through current budgets is the VP able to get the best bag for the buck. Meaning is he/she able to work within budget and still drive growth. Or is the VP’s expense account etc out of hand. Flowcharts help show the work flow and if the VP is responsible for more than he/she needs to be. So if they were lost what other critical functions be affected that nobody had even considered. Other records could the VP been able to negotiate with the city and university to help in securing tax breaks, transferring certain risk, joint marketing expenses because of the VP connections and relationships. Severity would be the biggest concern. However the severity could be controlled and would make the difference between a MPL or PML. For example: If it was a sudden death we can rule MPL because of the nature of the loss. However if it was a resignation or termination there could be a short term MPL and even


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: long term PML from the possible fall out. Such things as a sickness or retirement can be dealt with and should have little or no affect on the organization. Loss prevention & reduction - Start mentoring key people so that they could step in should there be a loss. Make sure the VP is compensated well and do not micro manage such a personality

Risk financing techniques -

Purchase Key man insurance Have some cash aside in case contract dispute

A) 4.

Property Damage (Total Fire Loss)

B) There are a number of property Damage losses that could be classified under frequency or minor losses, which can be dealt with through prevention, avoidance, transfer and retention. For this analysis I have decided to focus on the negative and positive of a catastrophic loss, such as a Total Fire Loss. Most people(s) first reaction to a total fire loss is one of desperation, however if a solid risk management plan has been implemented there is no real concern. (This is not to say there will be some stress along the way) The current ownership has been established within the community for 25 years and we are assuming that they own the building out right. We are once more assuming that the building is 25 years old and a combination of steel, concrete and some frame. By using different identification methods we need to establish what the total cost would be to the organization to rebuild a new stadium. (Will address Business Interruption below) • • • •

• •

Questionnaires – will provide a list of equipment and contents (Real tangible property) Financials – will provide guidance when dealing with retention and transfer scenarios (Amount of pure liquid cash on hand that can be allocated to rebuilding project) Other Records – Lease agreements with vendors, city by laws, new building codes, building permits, etc (Will help to provide what additional costs that must be factored in to the rebuilding project) Flowcharts - Will help to review what staff needs to involved in the rebuilding project and who can be laid off and who stays on. Also a separate flow chart should be drafted for the building project itself and ready to go should a total loss occur. Personal Inspection – Will help to give risk manager size of the project. At the same time he/she may have insurance underwriter(s) involved. Expertise – True appraisal must be done every few years, city planning department officials, fire department officials, general contractors, engineering firms, accounting and finance people, insurance company, etc are just to name a few that should be involved.

Severity would be the biggest concern. After reviewing the above information one could figure out with some certainty what the MPL and PML would be. Example: If the building is say 75% concrete and after the fire engineers deemed the concrete to be safe than we can use PML. However if the concrete were not safe than we would use the MPL.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: Loss prevention & reduction - Maybe by installing a new sprinkler system we could reduce our exposure to for a Total loss - Having certain areas sprayed with fire restive foam may also help - Not allowing certain activities such as smoking - Making sure all venders with Deep Fat Fryers have proper CO2 or Wet Chem system.

Risk financing techniques -

Transfer as much as the cost to rebuild as possible (Insurance) Set up a trust fund with the city and university to be administered by third party for such a major loss. Thus helping to share in the cost with insurer and reducing premiums and down time.

There is a positive side to such a loss if a proper plan is in place. The ownership, city and university now have a brand new facility that the community can use. Updated material, technology, seating etc can help to create a buzz with tkt holders. A positive marketing plan throughout the course of construction can help to keep people engaged and may even generate more lease agreements with vendors, teams and events in turn generating bigger revenues. A) 5.

Business Interruption

B) Sticking with the theme of a Total Fire loss, if a solid plan has been out in place there should be little impact to the financial wellbeing of the ownership in the long term. •

• • •

Questionnaires – should be set up to review the positive and negative impact such a loss would have on both the suppliers and consumers (Looking at the amount of money that would be injected back into the local community because of buying local material and labor for the reconstruction – the negative impact on say hot dog suppliers and other vendors – short term) Financials – One of the big factors to look at here is after 25 years is the ownership in a good financial position. If not there could be some serious concerns and a total fire loss could spell the end. It is extremely important that the financial statements are reviewed with great detail. This will help to provide what amount of cash flow is needed to keep the organization running through this period rebuilding. Other Records – Special funding from local government, Player contracts, Staffing contracts, vendor and advertising contracts Flowcharts – Key personnel that will stay on during the course of construction Expertise – Lawyers and accounts are important. Will help to deal with legal issues that may arise with creditors (if any) third party accounting firms to help audit and give recommendations on things that might have been missed with an internal audit.

Severity would be the biggest concern. Lost revenue and the loss of key people who may of found work elsewhere. Loss prevention & reduction - Have financials update - Have alternative finances available Risk financing techniques -

Buy business interruption insurance Work out deals with City etc for potential tax breaks, grants etc


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 3 - Answer The best example I can think of is a Non-profit organization. Let us use a shelter for abused Women and children. The shelter has a building that provides housing, counseling and training. There funding is 95% private and 5% government. 10% of the funding goes towards the administration cost. The board of directors’ works very hard to keep admin costs down in order to provide the best care possible for the women and children of the shelter. For the last ten years the have never had any problem and have been able to use professional consolers, nurses and teachers that have donate their time. They had never carried professional liability, for no one had ever thought about. Now their P&C insurer is asking about the coverage because of an audit of the file. They were also informed that under their liability wording it does not include volunteers. In order to have the coverage extended it will increase their liability premium by an additional 15% and only if they can prove the have been able to place professional liability. They have also learned that the property portion of their policy has increased by 5% and a higher deductible has been applied with respects to vandalism. The board has never purchased D&O insurance for when they had inquired in the past the cost would affect the bottom line. So they had all agreed they would operator with out in order to allocate more capital to the helping provide services. They have also been informed that Abuse or Molestation coverage will no longer be included in their CGL wording. This means they must purchase from a specialty market, which costs more for less coverage than they had before. The board of directors many of whom are very wealthy and well to do individuals are now very concerned. Under the current laws there is no protection for board members of non-profit organizations. Some members now worry about their personal assets and demand for D&O coverage or they will resign. This is a concern for the other board members for the people leaving are very well respected and their leaving would signal to other potential members to stay away. A risk management firm has donated its time to review the situation, as a favor to one of the board. After reviewing all techniques there are some solutions but the organization must bare some additional costs. It should be noted that there are solutions to these problems and the board must ask themselves what is their responsibility to this cause. The members because of their wealth and power could: • • •

Fund the D&O insurance themselves as a group (Check with accounts for tax advantages) Fund with there own money and some other donations a slush fund that they can administer to be used for losses Have a legal firm donate their time to deal with issues that may arise

There are always solutions…


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 4 - Answer A) Standardized Questionnaires 1.

Property Questionnaire – Can provide details of a particular building (size, constructions, age, sprinkler, adjacent exposures etc).


Staffing Questionnaire – Can provide information on personnel issues (number of employees, education levels, unions, any contracted employees, injuries, etc).


Products Liability Questionnaire –Can provide information on liability exposures (ISO certified, processing procedures, number of quality control people in place, recall procedures, number of units sold in local area and around the world, etc)

B) 1.

A major concern with questionnaires is the structure of the questions along with the person(s) filling them out. Example providing a questionnaire to the maintenance manager dealing with quality control would provide distorted information. However having both the maintenance manager and the quality control manager work on the questionnaire would provide a more rounded analysis.

A) Financial Statements and Underlying Records 1.

Balance Sheet – Can help provide a list of assets (Equipment, Stock, etc) which can allow one to use a guide in figuring out what limits might be used when securing an insurance contract.


Income Statement – Is a good way to estimate possible business interruption loss should a sudden and accidental loss take place.


Statement of Cash Flows – It helps to show financial capacity by reviewing cash receipts and cash payments. Can help to determine if the company has any excess capital to allocate towards a loss.

B) 1.

There are limitations when using a balance sheet. Asset valuations are looked at differently in the accounting world. Thus when trying to come up with replacement cost values for equipment the number will be off. Another example is trying to set targets based on old loss payouts. What was settled say, 1 year ago will be different than current costs of today.

A) Other Records & Documents 1.

Board Meeting Minutes – Can help provide one with a sense of where the company is heading. Giving one the insight on how the board would want certain situations handled


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: 2.

Managers Meetings – Reviewing minutes from managers meetings. Looking for things such as workflow changes or quality control issues. This allows the risk manager to address potential problems before they happen.


Industry Information – Such things as legal case studies, upcoming changes in a particular provincial or federal law, statistics and much more. This info allows one to avoid certain upcoming problems that may for example slow down a new product launch etc.

B) 1.

The big issue is over load. There is just too much information out there to go through. This can slow one down and maybe even miss the most important information because it took too long to get to it.

A) Flowcharts 1.

Particular Loss Scenario – Can help given one a structure view of how other departments or process could be interrupted should a loss occur. At the same time pointing out weakness that may have never been seen before.


Organizational – Helps to establish where the chain of command starts and ends. Gives one the ability to pin point what individuals will be counted on to make key decisions in the event of a minor or major loss.


Workflow – Could point out major concerns dealing with a MFG process that could cause a problem in reference to products and completed ops exposures.

B) 1.

They are not able to provide data dealing with frequency and severity.

A) Personal Inspections 1.

Visual Inspection – A picture is worth 1000 words and seeing it live is priceless. (There could be a horrible smell coming from a particular area, which could be related to a bigger problem. Something a camera was not able to pick up)


Conversations – Talking to staff etc., can really provide a lot of information. Are employees happy or disgruntled.


Employee Body Language – Watching how staff carry themselves , operate machinery etc

B) 1.

They know you are coming. When a department’s management team knows that an inspection is coming up it usually cleans up and is on their best behavior.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

A) Using Outside & Inside Consultants 1.

Internal Computer Programmer – Would be extremely familiar with the ins and outs of the companies system. Confirming what the limitations are.


External Computer Programmer – Having a third party consultant come in and take a look they might find exposures and opportunities, given their different perspective.


Legal Team – Having a third party law firm review your current corporate structure, warranties, etc.

B) 1.

You may not have a large enough budget to bring the best and most experienced consultants.


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 5 - Answer A) 1. ASSESTS


Twelve storey Hotel Two storey Hotel Cash, Cheques and Credit Cards of Guests Parking Garage Vehicles Contents Owned in All Buildings Vault (Bailee) Boat Private Doc Fire Tower Employees

Taxes Taxes Refunds / Commissions to Travel Agents Taxes

Damage or Stolen Goods of Guests

Weekly Payroll



Hotel Revenues Rental Income from Motel Ops Ltd. Rental Income from Tenants Parking Boat Rides Off Season Sales Restaurant Sales

Weekly Payroll Maintenance of Building Collections Fuel and Maintenance Free Golf , Reduced admission to theaters Food / Maintenance


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

2. LISTED ITEMS Twelve storey Hotel Two storey Hotel Cash, Cheques and Credit Cards of Guests

Parking Garage

Vehicles Contents Owned in All Buildings Vault (Bailee)

Boat Private Doc Fire Tower Tenants In the Hotel (Clothing Store and Lounge)

PROPERTY LOSS EXPOSURE Tangible Real Property Loss Tangible Real Property Loss & Intangible Property (Lease agreements) Tangible Real Property Loss (Theft or destruction) Also Intangible Property Loss (Customers Good Will) Intangible Property Loss (Customer Good Will) Also Tangible Personal Property Loss (For Vehicles of others are in your care, custody and control) Tangible Property Loss & Intangible Property Loss Tangible Property Loss Tangible Property Loss (Items are in your Care, Custody and Control) & Intangible Property Loss (Customers Good Will) Tangible Property Loss Tangible Real Property Loss Tangible Real Property Loss Intangible Property (Lease Agreements)


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail: 3.

Other Revenue Sources

Marketing / Travel Agent , etc

Hotel Pick Up @ Airport Free Service


Guest @ Hotel (check in)

Free Services or Included in Hotel Price

Rental Income from Motel Corp. Inc.

Available Activities








Free Service

Free Service

Free Service



PAID Services


Supplies, Labor & Utilities


Clothing &

Golf, Dance &

Not Free




Not Free

Not Free but certain times

• •

• • •

Water, power, etc Service Employees Maintenance Employees Third Party Contractors (Either plumbers, etc or professional masseuse) Soaps, oils, towels, etc (regular supplies common to such operations)

Free and reduced

Supplies, Labor & Utilities Maintenance and Upkeep of private dock / qualified employees to man the boat / Fuel

Supplies, Labor & Utilities

Supplies, Labor & Utilities

Concern would be with other business not able to accommodate hotel guests

Maintenance / fresh food supplies / basic utilities / cold storage issues

Supplies, Labor & Utilities This portion is contracted out. Review of agreements on how tenants pay landlord. Rent and portion of sales. Standard utilities must be supplied to tenants


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

4. As noted I see lost revenue from potential deals that might have been made with Golf course and other business within the city. There is one wild card that we do not have any control over which is the fivestorey building. A 12 foot separation is not a lot of clearance should the building collapse or be on fire.

Question 5 - Answer B)

Descending Importance Hotel Property (Because both buildings are located in same area there is a major concern for losses to each) (Including real & personal property)

Cash, Cheques and Credit Cards of Guests

Frequency Moderate – As stated weather plays a very important role in the success of the business. Of course weather is becoming more and more unpredictable. This moderate rating could be upgraded to Definite Moderate – If proper procedures and controls are not in place there could be a numerous losses.

Adjacent Five-Storey Building

Slight but a concern – causing damage to our building and surrounding area

Owned and Non –Owned Garage

Slight – Care, Custody and Control of guests’ vehicles causes some concern. When parking or driving. (Damage to vehicles) Almost Nil – Important component to both the safety of guests and preservation or real and personal property. Helps to contain a fire loss to a particular area. Which in turn could allow the rest of the building stay open and still generate income.

Fire tower (very important in dealing with 12 storey building)


Severity Significant – As stated there was personal property loss two years ago which created property damage and lost revenue. (Side note if guests are present during such a loss and situation is not handle properly there could be a significant intangible loss)

Significant – There could be major loss mainly from a senior manager with control of monies. Once more if there are proper controls in place this can be greatly reduced. Significant to Severe – concerns with fire, environmental contamination, lost revenue because of this possible loss it could cause us both Tangible and Intangible problems Slight - Only really concern is possible collapse of parking garages. However it would have to be proven you were negligent. Severe – This structure could cause water damage if it collapses.

Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 5 - Answer C) - 1. i) Physical inspection of all property owned by Pacific (incl. dock, other motel, owned garage and non-owned garage), will help the risk manager understand the scoop of a total loss should a severe weather storm hit the company’s assets. Such things based on pure physical appearance: • Roof • Sidewalks • Dock – condition and construction materials • Boat – In good shape • Cracks in the boiler since it was damaged two years ago (A professional for this should be brought in) • Watching how employees handle cash transaction with guests • Roof top Pool is a something that should be looked at • Proper caution signs around the buildings ii) Speaking with desk clerks could provide information dealing with: • • • • • • • •

Type of guests (concerns for vandalism) (example- Spring break and students) Get a feel for how key managers might be treating staff Do staff have a concern for the company Do staff have concerns for certain employees (possible theft issues because of the large amounts of cash handled) Are there concerns about safety with in the work place Are staff experienced – Example the staff navigating the boat tours How where things handled two years ago when they had the flood claim How long have they been working for the company

iii) Maintenance records especially for the 12 storey building are very important. Such things as: • • • • • • •

Last Sprinkler Test CO2 or Wet Chem systems for Restaurant Elevator Daily cleaning Emergency calls Boiler inspections Who does what – Example do you have the grounds guy inspecting the boiler


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

C) - 2. i)

Combining the physical inspection, building plans and inspection records it can be seen that the 12 storey hotel is well built

• • •

Construction: Fire-resistive (meaning steel on steel, concrete with fire proofing) Protection: Has an automatic sprinkler system, is it hydrant protected, how far away from fire dept. Occupancy: There are some concerns here… Is the building smoke free, does the kitchen have proper C02 or Wet Chem system, do they have the ducts for deep fat fryers cleaned on a regular basis? Adjacent Exposures: As stated earlier the 5 storey building 12 feet away is a major concern and is the wild card. We do not have any control over this exposure. The Water Tower: Is it checked and tested on a regular basis? Is this the only water supply to for the sprinkler system? If so how much water does it hold? where does the water come from, etc

• •

ii) Personal inspection, financials, building blue prints, etc will help in analyzing theft of money from the hotel premises: (On the biggest tool the risk manager has is just to observe the every day operations along with talking to staff he or she will be able to have a very good understanding of the potential for loss) • • • • • • •

Review prior losses or incidents involving anything to do with lost and stolen money Review Statements of Cash Flow – Look for a pattern of short floats etc Review how money employees handle money. How long have they been employed with the Hotel. Are they seasonal, full time or part time Does each department have a manager or supervisor that does the daily closings Is all money from all revenue sources collected daily, hourly, weekly? Does it all go to central location to be processed? How many deposits a day? Is their security (guards, alarms, etc) to deter robbery? How many employees have access to the hotels vault?


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 5 - Answer D) 1. Hotel Property Tangible , Intangible (Real & Personal) Avoidance Loss Prevention

There real is no way to avoid weather risks. Sticking with the theme of weather. Review the cost benefits of building a breaker wall to avoid another storm serge in the future. Look at placing boiler on the roof. Maybe review generated income statements for offseason and see if it might be possible to close down during annual bad weather cycles. This would help to reduce the Intangible risk. Maybe move some key personal property off site during times of potential danger. Works well if there is enough cash on hand. Could cause problems in annual down cycle of business (Off Season) This technique would work nicely with the above in helping to set up a Pre-Loss Funding method. A little like hedging it could work like this. Use property two by placing a mrtg on it and have the cash placed in a secure by high return investment vehicle. Since property one (12-storey building) can generate more cash flow it stands to reason down time is not an option. Really only applies to location 2 the property that is rented out. In the lease agreement it should be a triple net lease making the tenant responsible for all expense and liabilities (insurance coverage) thus reduce expenses and possible lost rental income. This is an excellent technique, however because of prior losses and location of property it may very expensive or impossible to place certain coverage(s). Such as flood!!! – This technique should be used in combination with risk retention.

Loss Reduction

Separation /Duplication / Diversification Retention through current expensing of losses

Retention through borrowing

Contractual Transfer

Commercial Insurance


Student Number: X061804 / Paul Jewett Course Number: SCS 0981-033 / Risk Assessment Ph: 506-387-7583 / E-mail:

Question 5 - Answer D) 2. Cash – money & securities (Theft Coverage) Avoidance Loss Prevention

Can not be done Place rules and guidelines on cash handling and deposits. Only allow certain employees to close up at the end for day. Use smaller cash floats., etc Make sure two people check all deposits. Place video surveillance in all areas where money and securities are received and handled. Have a copy of daily deposit sent directly to third party accounting firm. This would be the case – very hard to plan such a loss and mostly likely would have to be this way. Does not make sense to tie up capital for such as loss. Not an option Not an option There is insurance available to cover all employees and key employees. However the insurance company may limit the coverage and values that they are willing to provide terms for.

Loss Reduction

Separation /Duplication / Diversification Retention through current expensing of losses

Retention through borrowing Contractual Transfer Commercial Insurance

D) 3. Adjacent Five-Storey Building Avoidance Loss Prevention

Can not be done (unless you buy the building) Have engineers review your option in fortifying your building from a fire or collapse. Maybe make sure critical offices and systems are on the opposite side of the building. Contact the local city officials, fire Marshall, etc Move certain personal property to another location No an option Use the financing to purchase the building Not an option Make sure you carry adequate insurance to cover should a loss occur

Loss Reduction Separation /Duplication / Diversification Retention through current expensing of losses Retention through borrowing Contractual Transfer Commercial Insurance




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