The risk management process has 8 components. These are internal environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring.

Estimates the magnitude and timing effects of a risk on the firms costs, revenues, or cash flows.

The above scenario refers to the process of:

Risk assessment

Event identification

Selection of a risk response method

None of the above

Consider the following case:

Red River Roadways, a U.S. company, hauls freight for Canadian, U.S., and Mexican firms. It currently operates 75 trucks and 300 trailers in all three countries and invoices its customers in their local currencies. Company management is becoming increasingly concerned with its risk exposures and recently expanded the responsibilities of the chief financial officer (CFO) to include a risk management function.

Which of the following statements regarding Red Rivers risk management activities are true? Check all that apply.

Red Rivers trucks and trailers are exposed to physical and liability risks when operating on the road. One method that manages these risks is to purchase commercial insurance for the trucks, trailers, and their customers cargo.

Among the personnel risks to which Red River is exposed are damages to Red Rivers trucks and trailers or employee-caused damages to customers cargo.

Red Rivers risk management program should not be evaluated solely using a costbenefit analysis for each feasible alternative.

One risk facing Red River is the potential for a countrywideor even worse, worldwiderecession, which would reduce both the volume of goods being shipped and the demand for Red Rivers services.

The fact that Red River has borrowed funds using fixed-rate peso-denominated loans in Mexico, fixed-rate Canadian dollardenominated loans in Canada, and floating-rate U.S. dollar loans in the United States has not created any foreign exchange or interest rate risk for the company.