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Get motivated
if you had a bad time last year
https://www.youtube.com/watch?
v=MRQizPcZWBI
http://www.youtube.com/watch?
v=0yetHqWODp0
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Source:Internet
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Then
http://www.youtube.com/watch?v=obq5gJrO3z0
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Outcome
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Ahotairballoonburstintoflamesandcrashedtothegroundin
NewZealandonSaturday,killingall11peopleonboard,after
hittingapowerline.(January7,2012)
Similaraccidentscontinuetohappeneveryyear.
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Definition of RISK
webster.com
1: possibility of loss or injury : peril
2: someone or something that creates or suggests a hazard
3a : the chance of loss or the perils to the subject matter of an
insurance contract; also : the degree of probability of such loss
b : a person or thing that is a specified hazard to an insurer c :
an insurance hazard from a specified cause or source <war
risk>
4: the chance that an investment (as a stock or commodity)
will lose value
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Subjectiveriskisdefinedasuncertaintybasedona
personsmentalconditionorstateofmind(hotair
balloon=>moreriskynow!Howabouttravellingby
planeafterthedisappearanceoftheMalaysiaAirlines
Flight17)
Twopersonsinthesamesituationmayhave
differentperceptionsofrisk(youmayhavenofearif
youarebeinggunpointedif.)
Highsubjectiveriskoftenresultsinconservative
behavior
Thinkaboutbuyingstocks
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Chance of Loss
Chance of loss: The probability that an event will occur
Objective Probability vs. Subjective Probability
Objective probability refers to the long-run relative frequency of
an event assuming an infinite number of observations and no
change in the underlying conditions
It can be determined by deductive or inductive reasoning
E.g. probability of getting a head from coin tossing vs probability
of a person having car accident in a year.
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Classification of Risk
Pure and Speculative Risk
A pure risk is one in which there are only the possibilities of
loss or no loss
earthquake
A speculative risk is one in which both profit or loss are
possible
gambling
Diversifiable Risk and Nondiversifiable Risk
A diversifiable risk affects only individuals or small groups (car
theft). It is also called nonsystematic or particular risk.
A nondiversifiable risk affects the entire economy or large
numbers of persons or groups within the economy (hurricane).
It is also called systematic risk or fundamental risk.
Government assistance may be necessary to insure
nondiversifiable risks.
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Classification of Risk
Enterprise risk encompasses all major risks faced by a
business firm, which include: pure risk, speculative risk,
strategic risk, operational risk, and financial risk
Financial Risk refers to the uncertainty of loss because of
adverse changes in commodity prices, interest rates, foreign
exchange rates, and the value of money.
Pure risk
Speculative risk
Strategic risk
Operational risk
Financial risk
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Insight
About half of all personal bankruptcy cases are (at
least in part) due to medical reasons
2000-2007 June: 5 million families filed for
bankruptcy due to medical reasons
20% of people who reported having medical bill
problems considered filing for bankruptcy (bills too
expensive)
More than half of adults with inadequate insurance:
didnt fill in prescription, skipped recommended
tests, treatment or didnt go to doctor for medical
advices. $$ problem
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Whatcanyoutellfromthefiguresabove?
(not including value of primary residence or defined benefit plans)
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e.g. FireatFaYuenStreetkilled9andinjured34(Nov.2011 )
Rallyover'photoban'shutsretailerDolce&GabbanainTsimShaTsui,Jan10,2012
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http://www.youtube.com/watch?
v=00ZmGa8Q42E
http://www.youtube.com/watch?v
=O4rSiUPGt3A
http://www.youtube.com/watch?
feature=player_embedded&v=Vde
yQaQNckA
Amazontestingdronesfordeliveries
Writedownthetypesofriskinvolved
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Haveyoueverplayedgolf,remotecontrol(rc)toys,etc?
WomenkilledbyrcaeroplaneinMainland.
Mangothitbyagolfball.
ManparalyzedbyrchelicopteraccidentinH.K.
TheownerofthehelithathithimwasonlyfinedHK$5000(US$642).
AcivilsuitthenfollowedandthevictimwasawardedHK$8.8M(U$1.13M).
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Brainsurgeryformanhitbywaywardtoycopter
PatsyMoyandCarolChung
Monday,January14,2008,,http://www.thestandard.com.hk
A44yearoldmanunderwentemergencybrainsurgeryafterhewashitbyaremote
controlledtoyhelicopteryesterday.LawKwokwahwasrushedbyambulancetoQueen
ElizabethHospitalwitha20centimeterlongwoundtothebackofhishead.Law,who
worksinatravelcompany,wassaidtohaveover10yearsofexperienceflyingtoy
helicoptersandhadwoninlocalcompetitions.Policesaidtheaccidenthappenedat
1.48pmwhenLawandhisfriend,surnamedWongandover40yearsold,wereflyinga
remotecontrolhelicopteratanopenspaceonChunWangStreetinTseungKwanO.
Policesaidthemanwasafriendofthetoyowner.Lawaskedtotrythetoyand
accidentallyhitabuttonon
theremotecontrol,causingthehelicoptertocrashintohishead.
Thebladesofthe1.5meterlonghelicopterbrokeoffintheaccident.Thehelicopter,
weighingsixkilograms,canflyupto90kilometersanhour.Policearestillinvestigating.
TheCivilAviationDepartmentsaiditwillfollowupthecase,addingthatlicensingisnot
requiredforhelicoptersweighinglessthansevenkilograms.Theaccidenthappenedata
governmentsitewithawarningsignprohibitingflyingremotecontroltoys.Butsome
aficionadossaidtheysimplyignoredthewarningduetolackofotherplacesinurban
districtsfortheiractivities.AMrTong,whohasbeenflyingremotecontrolhelicopters
forthepastthreeyears,estimatedtherewere50,000to80,000playersinHongKong.24
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5000
( )2 6 05:05
5000
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http://www.daddyhobby.com06022009
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9/11/2004
TheHighCourtorderedtheIncorporatedOwnersAssociationofAlbertHouse
inAberdeentowindup,tenyearsafterafatalcanopycollapsethere,inwhich
awomanwaskilledand13othersinjured.Itcouldnotrepay morethan
25milliondollarsincompensationandlegalfeeswithinareasonable
period.
Beawareoftheabovecasewhenyoubecomeapropertyowner
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encumbrance
2500
6 22 10
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94 8 1
1
13
6
3000
136
2001 15%
http://www.gaforum.org/archive/index.php/t101471.html
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Indirect loses
2008 08 18
http://hk.apple.nextmedia.com
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25
..
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HaveyouheardabouttheBPoilspill2010?Notyetsettledin2014
Whatisthedirectloss?
Indirectlosses?
AUSjudgehasgivenfinalapprovalto
BPs$7.8bn(4.8bn)partsettlementwith
businessesandindividualswhosuffered
lossesfollowingitsdisastrousGulfof
Mexicooilspill.
Thesettlementresolvesmostprivate
individualsclaimsforeconomiclossand
propertydamage,butitdoesntcover
lawsuitsbroughtbytheUSgovernmentor
thosebroughtbythestatesofAlabama
andLouisiana.
http://www.telegraph.co.uk22Nov2012
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5. Insurance
WhattechniquesdoyouthinkBPemployed?
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Concept check
Fog that increases the chance of an
automobile accident is an example of a
A) speculative risk.
B) peril.
C) physical hazard.
D) moral hazard.
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Concept check
the cause of a loss is called________
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