Assume that you treat a situation with three risk treatments: For low risk levels, risk would be self-retained, (self-insure, or take on the risk). The intermediate response level was to consider insurance and loss reduction actions. For high risk levels, the policy response was to take actions to avoid risk and transfer it to others through contracts or other means.

The two risk matrix dimensions were frequency and severity. Ranges for each were established with the scales shown in the following table.

Scale	Frequency	Verbal rating	Severity	Verbal rating
1	Once in over 3 years	Unlikely	10,000 NTD or less	Slightest
2	Once in 1-3 years	Seldom	10-50,000 NTD	Slight
3	Once in a year	Passable	50-100,000 NTD	Passable
4	Once in 6 to 12 months	Occasional	100-500,000 NTD	Critical
5	Once in less than 6 months	Regular	Over 500,000 NTD	More critical

Develop a 5 x 5 risk matrix (complying with guidelines from Cox given in Chapter 2 of the text) and assign treatment for each cell.

Apply your risk matrix to the following three situations, identify where shippers A, B & C fall on your matrix:

Risk Factor	Severity	Frequency	Risk Level
A Shipper receives cargo early, decreasing flexibility	5,000 NTD	Once every 10 months
B Cargo late, shut out by customs authority for lack of compliance	600,000 NTD	Once every 2 years
C Cargo handling time extended 1-3 days by security inspection	75,000 NTD	Once every 2 months

Answer rating: 100% (QA)

Shipper A Risk Level 3 Passable SelfRetain Shipper B Risk Level 5 Regular A... View the full answer