City Bus Corporation provides school bus transportation to private and public schools in Lancaster County. City Bus owns 50 buses that are garaged in three different cities within the county. The firm faces competition from two larger bus companies that operate in the same area. Public school boards and private schools generally award contracts to the lowest bidder, but the level of service and overall performance are also considered.

a.Briefly describe the steps in the risk management process that should be followed by the risk manager of City Bus.

1.Identify loss exposures - Identify all possible (major and minor) loss exposures and anything that can be a potential loss

2.Measure and analyze the loss exposures - Measure and quantify the loss exposures to manage them. This includes determining the loss frequency, and loss severity of each loss, and determining the maximum possible loss and the probable maximum loss.

3.Select the appropriate combination of techniques for treating the loss exposures - Utilize risk control (techniques to reduce the frequency or severity of the losses) and Risk financing (techniques that provide the funding of the losses.)

4.Implement and monitor the risk management program - Have a risk management policy statement and a risk management manual, and ensure that everyone involved in the company is aware of these policies and regulations.

b.Describe several sources of funds for paying losses if retention is used in the risk management plan.