BF341 Risk Management Assignment

Overview

The following is the risk management project for the course. As we discussed, this project has

transitioned to an individual project. You are free to use the textbook, powerpoints, and any class notes

you have developed in formulating your response. Do not utilize any external sources beyond these

materials. The question will emphasize material developed in Chapter 3 and Chapter 26 of the text. The

paper should be 3-4 pages in length to answer the questions completely, but the paper cannot exceed 5

pages, double spaced, 12-point font.

For the purposes of this question you are to assume the role of the Director of Risk Management for

Boeing, Inc. Recently Boeing has experience significant problems with an aircraft it designed and

manufactures – the 737-MAX-8. For additional details regarding the issues examine the following links:

https://www.cnn.com/2019/03/10/africa/ethiopian-ai…

https://www.cnbc.com/2019/04/04/ethiopia-report-calls-on-boeing-to-confirm-that-control-issues-are-

fixed-737-max-8.html

https://www.businessinsider.com/boeing-ceo-apologi…

https://www.vox.com/business-and-finance/2019/3/29…

Part 1

Identify three critical loss exposures associated with the design, development, distribution and sale of a

new aircraft for a company like Boeing. Which of these exposures is the most significant in terms of loss

severity and why? Finally, describe in detail two different risk control strategies you could apply to

manage any one of these loss exposures you identify among the three critical loss exposures.

Part 2

In responding to the issues presented by the 737-MAX-8 crashes, assume the company purchases the

following forms of insurance:

D&O Coverage – $200,000,000 in aggregate limit

Commercial General Liability (“CGL”) – $500,000,000 in aggregate limit

Commercial Umbrella – $500,000,000 in aggregate limit

Describe how each of the coverages might be called upon to respond to liability claims that may arise

related to the crashes from either the airlines that purchased 737s, the families of the passengers that

passed away as a result of the crashes, or the shareholders of Boeing, Inc. Remember that Boeing is

designing and manufacturing the planes, not operating them. Finally, highlight one exclusion typically found within a CGL policy in relation to the scope of coverage for the 737-max-8 problems.