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What is risk?

Uncertainty of an event or outcome.

What is political risk?

Difficulties arising from instability.

What is social risk?

Risks related to religious values and family ties.

What is economic risk?

Risks associated with demand, employment, interest rates, and inflation.

What are the steps in the risk management process?

Identify potential risks, evaluate risks, select a risk management method, implement the risk management.

What factors should be considered when identifying potential risks?

Government policies/instability, currency values, and local customs.

What is risk avoidance?

Taking steps to completely eliminate or prevent a risk from occurring.

What is risk reduction?

Taking precautionary actions to minimize risk.

What is risk assumption (self insurance)?

Setting aside money to cover potential financial loss.

What is risk sharing?

Sharing risks among many companies, often involving insurance for protection.

What is insurance?

Planned protection for sharing economic losses among many people.

What is a stock insurance company?

An insurance company owned by stockholders and operated for profit.

What is a mutual insurance company?

An insurance company owned by policyholders, with surplus returned to them after claims and operating expenses are paid.

What must an insurable risk be able to do?

It must be able to be documented.

What is an insurance policy?

A legal agreement between an insurance company and the insured.

What is the declaration in an insurance policy?

It states what is covered and lists the amount of coverage.

What is the insuring agreement in an insurance policy?

It explains the coverages of the policy, both type and amount.

What is the premium in insurance?

The cost of insurance.

What is a deductible in insurance?

The portion of a claim paid by the insured that is not covered; higher deductibles lead to lower premiums and vice versa.

What are exclusions in an insurance policy?

Items or events not covered by the policy (e.g., floods, war).

What is an endorsement in insurance?

A certificate that adds to or changes coverage.

What are examples of insurable risks?

Injury to a customer on company property, damage to equipment from fire, death of a company executive in an airplane crash.

What is OPIC (Overseas Protection Investment Corporation)?

An insurance that protects against inconvertibility, expropriation, and political unrest.

What is inconvertibility?

A situation where a foreign government refuses to convert currency to dollars.

What is expropriation?

The seizure of assets by a host government.

What does an insurance certificate provide?

Evidence of insurance to protect goods from loss or damage while in transit.

What is all-risk coverage?

The most expensive marine insurance that protects goods during shipment overseas or while in port.

What is inland marine insurance?

Insurance that protects goods during shipment on inland waterways, railroad lines, truck lines, and airlines.

Property insurance

does not cover invonvertibility

credit risk insurance

coverage from nonpayment of delivered goods; Involve host country owners to reduce risk; Constantly monitor a country to anticipate changes

Global Businesses reduce risk by

operating in many different countries (diversity), offer many different goods and services, and employ local managers

FICA (Foreign Credit Insurance Association)

Encourage international business, insures exporters for risk of extending credit to overseas buyers, make it safer to participate in exporting