You just bought a new car and want to get an insurance policy for it for the next 5 years. You will either have only one car accident in year 3 with the probability of 25%, or you will have no accidents at all with the probability of 75%. The insurance company has three policies. The annual cost and the cost of having an accident under each policy is given in the following table. These payments are at the beginning of the year and start from year 0 to 4. Also, the right column shows how much money you should pay for the accident in addition to the amount which the insurance company pays for the accident. Which policy should you choose assuming you can earn 10% on your money? Annual Cost (5 payments from 0 Accident cost to you in to yr 4) as you pay case of an accident in before you need it year 3 425.00 $ 700.00 | $ 825.00 $ Plan Policy 1 High Deductible 2$ 12,000.00 Medium Deductable $ Policy 2 Policy 3 7,500.00 Low Deductable 4,400.00

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Risk Management Techniques

Risk management is the procedure of recognizing, analyzing, monitoring, and preventing the risks and threatening factors of investments and business. Risks can arise from various factors including internal controls, market changes, natural disasters, and failure in productions. Risk management techniques enable entities to control and minimize the risks as well as the threatening factors of the business and it also helps to improve the business.