Consider the Data

Brad explained that there are several factors that need to be discussed in his report.

"Transportation interruptions can affect our delivery commitments. Hurricanes in Florida and Georgia and blizzards in Illinois have to be considered. Some states have a greater skilled labor pool and some states are more management friendly than others. We're a nonunion com pany, so we need to consider the labor environment. Also, zoning regulations may impact growth. We have to ask how likely it is that changes to zoning laws might inhibit our expansion plans. Likewise, taxation policies: We have to evaluate how likely it is that taxes will increase. I spent some time talking with fire marshals trying to evaluate the risk of fire in each location. I learned that in arid, remote regions of the country, the risk of fire is greater than in wetter, more urban areas. Theft, like fraud, is very hard to predict. But certain geographic areas do seem to have higher rates of theft than other areas.

"I also assessed the costs of standard coverage. Certain regions are more expensive than others for standard insurance policies such as vehicle and workers' compensation coverage. Even if we self-insure, this criterion is a fair measure of risk."

Brad plans to attach to his report a printout of the stochastic simulation (a complex risk management analysis model that assigns probabilities and thus provides a more complete picture of the probable impact of future events). He explains, "I want the report to be no more than one page in length and both easy to read and easy to understand—period. When writing about insurance, it's easy to drift into statistics and complex, technical terminology. I want the executive committee members to be able to scan my report and 'get it.'"

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