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Question - Trevor Steel owns and manages Fitness Dynamics, which specializes in the design and manufacture of new forms of exercise equipment. Fitness Dynamics sells its equipment to health and fitness clubs island wide. The nature of Fitness's Dynamics products exposes the firm to a variety of risks. Some examples include the possibility that someone might be injured on a piece of Fitness's Dynamics equipment and claim that it was improperly made. Another person might have a heart attack and die while working out, with the surviving family members claiming that the Fitness's Dynamics equipment was to blame Fitness Dynamics has been conscientious about identifying and analysing the sources of risk to which it is exposed. Now the company must consider alternative ways to deal with those risks. It is possible that there may be some forms of equipment that Fitness Dynamics will not manufacture at all because of the high probability of serious losses. However, Fitness Dynamics is generally committed to the industry and in most cases wants to explore risk management alternatives that are compatible with continuing to produce a wide variety of new products. If Fitness can determine ways to produce safer products that have a reduced likelihood of causing losses, the firm will examine the economic feasibility of alternative manufacturing/inspection processes. Similarly, Fitness Dynamics is interested in exploring ways to make the health and fitness clubs bear more responsibility for losses, even when they involve Fitness Dynamics equipment.
Required -
A. Explain the concept of 'risk avoidance'. Explain to Fitness Dynamics when this would be an appropriate risk management technique for them.
B. Discuss TWO (2) other risk management techniques with appropriate examples that Fitness Dynamics may use in its business.
C. What technique can be used by Fitness Dynamics to make the fitness clubs bear some of the losses?
D. Explain to Fitness Dynamics 'Risk Evaluation' and 'Risk Identification in the Risk Management process?
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