FP11 1.02 Explain the role of ethics in risk management.

Because Maggie's primary goal is to get ahead in the company, she often uses questionable tactics to get a sale, which sometimes involves misleading her customers. Maggie's behavior is a risk to her employer because Maggie places more importance on personal gain than she does on:

• business ethics.

• her productivity.

• social responsibility.

• operating procedures.

Which is a potential negative consequence for a business which fails to manage risk by implementing an ethics training program for all employees?

• increased conflict

• damaged reputation

• reduced profit margins

• increased salary expense

Without ethical standards, risk management activities can sometimes occur:

• rarely.

• illegally.

• at the expense of other people.

• without a strong leader in place.

Michelle has acquired proof that her coworker Ted has been embezzling money from the company. If Michelle fails to inform her employer about Ted's activities, what will likely occur?

• Ted will be charged with a felony.

• The company's financial risk will increase.

• The company's property insurance premium will increase.

• The government will find the company for noncompliance.

A health food company claims that its products will cure many diseases, but without proof of this claim. When customers realized that the claim was unfounded, the company suffered from a damaged reputation and many lawsuits. The company's behavior is considered to be:

• favorable.

• moral.

• normal.

• unethical.

Which is an unethical activity that relates to risk management?

• issuing bonds to raise funds for a corporation

• withholding information from insurance underwriters

• requesting various documents to process a loan request

• using third-party debt collectors to obtain overdue payments

Emma is reviewing the sales budget in relation to the actual sales generated for a set time frame. Emma is using financial information in this situation to:

• identify external economic trends.

• analyze the impact of aging accounts.

• establish new quality standards and benchmarks.

• compare estimated performance with actual performance.

One goal of risk management is to:

• limit losses.

• increase expenses.

• increase employee loyalty.

• determine right from wrong.

To guard against intentional ethical violations, such as deliberate financial data tampering, an organization should maintain:

• daily balance sheets.

• audit trails of data changes.

• hard copies of all documents.

• an accounts receivable schedule.

To save money, an automobile manufacturer imported substandard parts resulting in engine fires. The manufacturer is now facing a class-action lawsuit which is an example of a risk associated with:

• trade secrets.

• service quality.

• domestic trade.

• product safety.