A Risk Manager Was Asked to Review All the Loss

question 49

Multiple Choice

A risk manager was asked to review all the loss exposures his company faces. The risk manager noted that the company obtained over 90 percent of its raw materials from one supplier. He voiced concern about business interruption if that supplier was closed for some reason. Acting on his recommendation, the company began to purchase raw materials from two other suppliers. Using multiple suppliers illustrates which risk control technique?

• A) risk avoidance
• B) duplication
• C) separation
• D) diversification

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Definitions:

Long-Lived Assets

Assets that provide economic benefits to a business for more than one fiscal year, such as buildings, machinery, and equipment.

Architect

A professional who designs buildings and in many cases also supervises their construction.

Accumulated Depreciation

This is the cumulative depreciation of an asset up to a single point in its life, reflecting how much of the asset's value has been used up over time.

Disposal Of Asset

Refers to the process of eliminating a fixed asset from the balance sheet due to sale, exchange, retirement, or loss.