Principles of Risk Management and Insurance
Please write your answers on a separate sheet of paper.
1. Managers may have incentives to take action that benefit themselves at the expense of the shareholders. What factors give them incentives to act consistently with shareholder value maximization?
2. Describe the most important components of the cost of risk that apply to the risk of shoplifting at a convenience store.
Based upon the following article, answer 3-5.
An Introduction to Bridgestone/Firestone, Inc.
Bridgestone/Firestone, Inc. (“B/F”) is an international manufacturer of products with manufacturing locations in 38 different locations throughout North and South America. Currently, all of B/F’s manufacturing sites are ISO 9000 certified and several of their manufacturing locations are also ISO 14000 certified.
Approximately 75% of their annual revenues comes from developing, manufacturing and marketing a broad array of vehicle tires. The remaining 25% comes from the sale of other products, including air springs, building materials, synthetic and natural rubber, and industrial fibers and textiles. B/F distributes its tires through more than 12,000 outlets, including independent dealers, discount retailers, warehouse clubs (i.e., Sam’s Club) and our company- owned stores. B/F also operates Firestone Tire & Service Centers, Mark Morris, Expert Tire and Tire Station retail outlets for automotive tires and service. Their GCR Truck Tire Centers serve the commercial trucking industry with truck tire service and retreading. Webco offers agricultural, forestry and flotation tire service and Cobre Tire services their off-the-road customers with tires and service for the mining and construction industries.
B/F operates tire testing centers around the world. In many cases, the racetrack is their test center. B/F’s participation in CART, IRL and Formula One racing...