Review Current General Risks
Evaluating External Uncontrollable Risk Exposure
Assessing Risk Regarding Facilities
Assess Employee Related Risks
Assess Exposure To Merchandise Loss
Assess Exposure To Embezzlement
Assess Exposure To job Site Pilferage
Review Safety Procedures
Review Loss Prevention Procedures
Evaluate Liability Exposure Regarding Employees
Assess Liability Regarding Care Of Property
Assess Exposure To Product Liability
Review Third Party Guarantees
Assess Liability Exposure Regarding Employment Practices
Examine Liability Exposure To Fraud
Evaluate Exposure To Tort Liability
Review Contractual Liability
Assess Liability Regarding Taxation
Assess Limited Liability
Identify Plan For Disaster
Assess Implementation Of Disaster Plan
Assess Likelihood Of Risk Occurrence
Evaluate Assets
Evaluate Indicators Of Loss
Assess Protection Against Obsolescence And Competition
Assess Protection Against Declining Sales
Assess Protection Against Former Key Employees

Review current major general risks

• Loss of major customers
• Uninsurable losses
• Loss of key employees
• Products outlawed or restricted
• Loss of crucial documents or records
• Computer crime
• Loss of Data Processing facilities
• Data Processing Breakdown
• Loss of software
• Espionage
• Embezzlement
• Loss of major suppliers
• Major lawsuit limiting available resources and resulting in significant costs
• Product obsolescence
• Restrictive injunctions
• Loss of production facilities
• Critical raw materials becoming unavailable or restricted
• Loss of credibility
• Exposure of Trade Secrets, secret formulas ....
• Piracy
• Spoilage of critical products (crops, animal products...)
• Damage to critical Land (farm land)
• Death of partner causing termination of business
• Inability to raise capital to finance negative cash flows
• Communications malfunction
• Data entry errors
• Fraudulent data entry and alterations
• Sabotage
• Misuse of resources
• Privacy act violation
• Product boycotts

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Evaluating external uncontrollable risk exposure

• Volatile Interest Rates
• Government Budgets
• Foreign Exchange
• Free Trade Agreements
• Recession
• Economic Policies (wage & price controls)
• Change in government
• Changes in tax, subsidy, policies and laws
• Government legislation reacting to public opinion to produce
• Inflation
• Demographic changes
• Labour laws regarding minimum wages, min. age requirements...
• Tariffs & trade quotas
• Changes in consumer expenditures
• Increases in cost of energy
• Pressures by public interest groups
• Terrorist acts

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Assess risk regarding facilities

• Technical obsolescence
• Restrictive space inability to expand
• Destruction to facilities caused by natural catastrophe (fire, tornado, hurricane...)
• Destruction to facilities caused by human catastrophe (riot, war, arson...)
• Theft of chief equipment (impossible, difficult, easy)
• Building's location to potential external hazards
• Safe, operating condition of equipment Safe, operating condition of vehicles Materials used in construction of building possibly resulting in occupational disease (asbestos, ?)
• Accessibility (visually or physically) to critical areas by casual visitors
• Adequacy of off storage site
• System access provisions obsolete or insecure
• Building designed for intended use
• Adequacy of electrical grounding
• Presence of overhanging or exposed pipes or electrical cables
• Improper routing of power cables
• Walls extending to true ceiling or floor
• Adequacy of drainage system
• Facilities located on unstable soil
• Duplicate copy of property records at separate location
• Ability to relocate

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Assess employee related risks

• Union forming
• Dishonesty, theft
• Employee morale
• Support for company policies
• Management support for security programs
• Possible failure of incentive programs Labour management relations
• Wage rates compared to competition
• Involvement in Worker's Compensation program
• Existence of promotion policy
• Bonuses and benefits perceived as being equitable

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Assess exposure to merchandise loss

• Adequate inspection procedures for shipments (incoming or outgoing)
• Cartons checked to ensure merchandise is actually there
• Loaded trucks attended or locked and parked in a locked garage
• Visibility in areas where merchandise is kept
• Restricted areas for high value merchandise
• During trade shows
• Single entrance and exits for employees and customers
• Full cartons and partially empty cartons kept separate
• Packing and wrapping materials at one location
• Physical inspection of parcels, briefcases, bags...
• Employees purses, parcels, briefcases kept at a supervised location
• Boxes checked before being disposed of
• Employees purchases verified and examined by supervising personnel
• Proper packaging protection of mdse for water damage, chemical spills, smoke damage
• Proximity of parking lot to storage areas
• Areas that are locked
• Access to keys
• Control over keys
• Loss to incoming or outgoing shipments

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Assess exposure to embezzlement

• Accumulations of cash and negotiable securities at operating locations Disbursements made by cheque
• Use of a cheque writing machine or permanent ink
• Pre-number cheques and requisitions
• Voided forms kept and accounted for
• Comparison of bank deposits and receipts
• Monitoring of refunds or credits
• Disbursements from petty cash supported by vouchers
• Periodic audits of various areas
• Authorized signatures on cheques
• Two or more signatures required on cheques
• Mail containing cheques supervised by responsible personnel
• Proper endorsements on cancelled cheques
• Approval procedures
• Excess cash deposits government insured
• Control over cash sales
• Related employees at same location
• Control over Accounts Receivable

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Assess exposure to job site pilferage

• Identification of valuable tools and equipment at job sight
• Recording of tools assigned to outside job sights (item, location, person responsible, ID marks)
• Tools signed in and out at job sites
• Marking of all tools
• Inspection of tools leaving with the employer

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Review safety procedures

• Presence of safety devices (fire alarms, fire extinguishers, sprinklers...)
• Careful handling of poisonous, toxic materials used in production
• Production process complies with health & safety regulations
• Employee safety awareness and safety training
• Secure storage facilities for hazardous and inflammable materials
• Periodic inspection of safety devices
• Periodic inspection of equipment, fixtures and vehicles
• Inspection of electrical wiring and heating equipment
• Emergency procedures documented and posted
• Procedures for reporting equipment failures
• Unobstructed fire and emergency exits
• Adequate emergency lighting
• Power and fuse boxes adequately marked
• Protection for fuel tanks
• Warning signs in place
• Test of safety procedures
• Effective waste disposal

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Review loss prevention procedures

• Existence of security program
• Effective disposal of sensitive and confidential material
• Secure areas of entry
• Secure document control
• Procedures for reporting security incidents
• Door locks and safe combinations changed regularly
• List of key and badge holders maintained
• Badges required to be worn at all times
• Personnel clearance, bonding of key personnel Uncleared persons escorted
• Guard posts occupied only by authorized personnel
• Package inspection
• Authorization for computer access
• Presence of security devices (alarms, cameras...)
• Periodic inspection of security devices
• Security guard's procedures documented
• Frequency of failure of loss prevention procedures to be completed
• Workplace monitored frequently
• Use of vault for storage of valuable papers
• Insurance coverage for valuable papers

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Evaluate liability exposure regarding employees

• Extent of interaction with the public
• Nature of their jobs
• Training programs to guard against negligence
• Detailed job descriptions
• Unauthorized signatures
• Unauthorized delegation of authority
• Malpractice
• Computer access restricted to competent authorized personnel
• Forgery

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Assess liability regarding care of property

• Damages to property of others while in your custody
• Damages to rented premises
• Damages to leased or hired vehicles
• Damages to leased capital equipment
• Damages to property of others

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Assess exposure to product liability

• Final use of the product
• Materials used in production
• Processes used in production
• Existence of quality control programs
• Effect on image of the company from injuries sustained from an unfit product
• Noncompliance with proper packaging and labeling standards
• Possibility of injury arising from the normal use of the product
• Possibility of injury arising from any abnormal use of the product
• Possibility of contacting disease resulting from toxic materials in the product
• Possible use of alternative, less hazardous materials in production
• Safety tests for the product

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Review third party guarantees

• Reason for getting involved
• Expected real return
• Current personal financial status
• Current financial status of third party
• Knowledge of 3rd party's business
• Hard assets owned by the business
• 3rd party's ability to run a business
• Personal ability to pay for liability for present or future debt of another party
• Affect on your own credit availability
• Specify exactly which debts will be covered by guarantee (principal, interest, costs)
• Ways of minimizing limits of liability (negotiate, accept only partial liability by sharing)
• Procedures for renewal automatic, periodic, ongoing
• Provisions in the contract
• timing
• terms for calling
• interest
• Conditions for eliminating guarantee
• Other guarantees outstanding
• Other forms of guarantees
• Insurance coverage for guarantee

Back to top Assess liability exposure with respect to employement practise

• Number and type of employees
• Organization of employees (unionized, non unionized)
• Hiring procedures & standards
• Procedures for dismissal of employees
• Compensation policy
• Benefits policy
• Policies that may be interpreted as being prejudiced
• Policies that may violate constitutional rights
• Collective bargaining procedures Policies regarding

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Examine liability exposure to fraud

• Advertising policy
• Actual ads for false or misleading statements
• Use of false name or trademark for product
• False claims about the product by sales personnel
• False statements made negligently
• Marketing tactics
• False data entry & alteration
• Misuse of resources
• Access to data processing facilities
• Alteration to important documents
• Marking of sensitive information
• Security of negotiable instruments
• Security of sensitive material
• Background checks on new employees
• Control over supplies
• Security of personnel records, data processing and accounts receivable records

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Evaluating exposure to tort liability

• Libel, slander, innuendo
• Trespassing
• Assault & Battery
• Allowing or causing escape of harmful things onto another persons level
• False arrest
• Inducing someone to break a contract
• Misrepresentation (innocent, negligent, fraudulent)
• Bringing criminal action against another person or company when you know there is no basis for it

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Reviewing contractual liability

• Nature of an offer & acceptance
• Communication of an offer & acceptance
• Duration of an offer & acceptance
• Withdrawal of acceptance
• Value consideration defined
• Past, present or future consideration
• Unlawful or impossible consideration
• Forgiveness of a part of debt
• Contracts made with minors
• Contracts made with mentally impaired persons
• Contracts made beyond the powers of the Corporate Charter
• Contracts made within the powers of the Corporate Charter
• Contracts made with bankrupt persons
• Contracts made with North American Indians or Enemy Aliens
• Contracts made under conditions of duress or undue influence
• Contracts imposing an undue restraint of trade
• Oral and written contracts

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Assess liabilyt regarding taxation

Assess "limited liability";

• Liable only up to amount of investment
• Personal assets used as collateral to secure bank loan
• Personal guarantees given
• Personal assets placed in spouse's name
• Amount of personal investment
• Amount of investment from family and friends

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Identify plan for disaster

• Maximum allowable time to return operations to normal
• Essential records and equipment
• Back ups for records and equipment
• Key employees to return operations to normal
• Essential space needs
• Temporary replacement for Data Processing facilities
• Access to temporary telephone extensions
• Temporary business forms to carry on operations
• Address wide range of disasters
• Duties of each key person
• Method of reaching them in case of disaster
• Priorities
• Coordinated contingency plan and procedures
• Contingency communications plan
• Alternate site security provisions
• Equipment replacement plan
• Back up agreement for alternate site
• Compatible processing at back up site
• Availability of transportation to or housing at back up site
• Emergency notification provisions
• Non telephonic emergency provisions Softwear maintenance procedures for adequate back up and recovery
• Test of contingency plan
• Update plan regularly
• Copy of plan kept at separate location
• Ensure employees know exactly what they are to do

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Assess implementation of the plan

• Contact key employees
• Issue public announcements
• Contact bank as soon as possible with details
• Update reports to the public and to the bank with details of recovery
• Assign responsibilities
• Obtain necessary equipment facilities and resources

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Assess likelihood of risk occurance

• Crime rates in the area
• Mission and activities of the business
• Integrity and honesty of the staff
• Staff morale
• Philosophy of management
• Number of prior threats
• Types of threats experienced in the past
• Number of safeguards in place
• Effectiveness of present safeguards
• Statistics on previous incidents
• Management support for security

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Evaluate Asset

• List of in priority sequence
• Value to the firm
• Market value and replacement value
• Effect of loss of asset on operations $'s
• Time lag between loss of asset and replacement
• Effect of time lag on operations $'s
• Rarity of asset
• Ability to replace

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Evaluate indicators of loss

• Inventory records do not match physical count
• Increasing number of voided forms
• Decreasing trend in employee purchases
• Bank deposits not corresponding with receipts
• Bad cheques frequently approved by single employer
• Sudden increases in consumption of supplies
• Above average rise in material cost per unit
• Alterations to documents, inventory records
• Merchandise missing from containers
• Merchandise found in unusual places

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Assess protection against obsolence and competition

• Ongoing Research and Development
• New uses for the product
• New users for the product
• Technology updates
• Product improvements
• New products
• Changing social norms
• Demand shifts
• Actions of competitors
• Competing products
• Pricing reviews and comparisons
• Warranty and service policy reviews and comparisons
• Renewal of licenses and patents
• Indicators of market saturation
• Wage rate reviews and comparisons
• Nature of the product how volatile

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Assess protection against declining sales

• Realistic sales projections
• Realistic projected production costs
• Plans for creating demand out of season
• Plans to meet demand capacity
• Continual evaluation of target market
• Effectiveness of distribution system
• Review of marketing strategy
• Review of incentive plans for sales persons

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Assess protection against former key employees

• Locks and combinations changed
• Change of computer access codes
• Notification of suppliers, distributors and business associates

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