IRM 3305 Risk Management Theory and PracticeFall 2014Proje.docx
- 1. IRM 3305 Risk Management Theory and Practice Fall 2014 Project Requirements: I. Teams a. 16 Students split into 3 teams . II. Weighting a. The Project is 30% of your grade. i. The presentation will be attended by Dr. Braniff as well as industry professionals and representatives of the National Alliance. ii. Start divvying up duties now – last minute work shows during the presentation. iii. Practice! Practice! Practice! - part of your grade has to do with the presentation having been rehearsed. iv. This is a PROFESSIONAL presentation – since we’ll most likely have outsiders joining us, presenters must dress in a professional manner (no jeans, proper professional attire). v. This presentation should mimic what you would be comfortable presenting to your board of directors and your CFO, etc. vi. You will be graded on the information presented, as well as the professionalism of your presentation and your team assessment.
- 2. III. Project Components: a. Executive Summary of your findings. The purpose of the executive summary is to summarize key points. i. Should include bulleted key points ii. Should include 1-3 graphs for visualization iii. No more than 3 pages (including graphs) iv. Make the summary part of the Power Point Presentation b. Power Point Presentation i. A visual presentation of the questions given to you for the project. ii. Needs to show application of information learned in class, not just a regurgitation of the questions and answers, I want to see critical thinking. iii. Presentations will occur on Monday, Nov 30 No exceptions, you MUST be present. Each group will present during this time (up to 30 minutes per group, at least 15). iv. ALL team members must present a portion of the project. c. All of the presentation documents need to be submitted to me. If you did not answer all of the questions in your power point presentation, I need to receive the answers in a document.
- 3. IRM 3305 Risk Management Theory and Practice Group Project October 16, 2015 The Pebbles, Inc. GENERAL The Pebbles, Inc. (the “Company) is a casino & resort operating company based in Las Vegas, Nevada, USA. The Company’s resorts feature high-end accommodations, gaming and entertainment, convention and exhibition facilities, celebrity chef restaurants, and clubs. In the past several years, the Company has decided to add a couple of other types of businesses, the most profitable being the Spinout School of Racing in Monte Carlo and the Big Shark Surfing School in Sydney. The current primary properties are listed below: LAS VEGAS, NEVADA The Big Gambler Resort-Hotel-Casino - 05/03/1999 Non-Gambler Expo & Convention Ctr. - 02/01/2002 Pebbles Resort-Hotel-Casino - 12/30/2007 MONTE CARLO, MONACO Pebbles, Monte Carlo – Resort-Hotel-Casino - 05/18/2004 Spinout School of Racing
- 4. - 06/14/2009 SYDNEY, AUSTRALIA Pebbles, Sydney – ResortHotel-Casino - 04/27/2010 Big Shark Surfing School - 04/27/2014 LAS VEGAS, NEVADA The Big Gambler Resort, Hotel & Casino is the pride and joy of Pebbles, Inc. There are over seven thousand spacious suites, designer shopping, world-class dining, and incredible entertainment. The location also includes a theatre where very well-known acts perform year round. The venue has an estimated seating capacity of 5,000. Typically, the theatre books a resident performer for 9-12 months at a time. Most recently, they signed on Brianne Smalle – a chart topping twenty-five year old pop sensation – to begin performing in the next 30 days. Unfortunately, Brianne has just been arrested after a multi-state car chase. To make matters worse, when she was finally stopped, the police found proof of major involvement in an international drug ring. In addition to her charges of DUI, she is now being accused of various charges related to the drug ring including money laundering, drug trafficking, human trafficking, kidnap and murder. The Non-Gambler Expo & Convention Center was opened in 2002 to respond to the demands of the city. The Expo &
- 5. Convention Center boasts over 2 million square feet with exhibit space of 1.5 million square feet. The location is central and is walking distance from over 100,000 guest rooms. The Convention Center is in the process of undergoing major renovations in order to accommodate the technology needs and desires of their guests and vendors. The intention was to complete the renovations by the end of the summer. Unfortunately, the main contractor, Trust Us Construction, is three months behind schedule due to the main project manager’s recent problems with gambling addiction. The convention center has a major exposition scheduled in two weeks for Fine China and Crystal of The World. The owner of the Center is convinced that the expo will go on as planned, confident that spare boards, exposed cords, drilling, hammering and multiple construction workers walking through the expo will be a minimal issue. The Pebbles Resort-Hotel-Casino is located off the main strip and is more a niche-casino, catering primarily to elderly tour bus visitors. This particular resort considers itself the top destination for their niche and offers many amenities geared towards their elderly visitors. These amenities include several medics and nurses kept on staff in case any issues arise with their valued patrons. As a favor to a friend, the manager at the resort has hired a new company, Slips R Us, to maintain the safety of the resort. The first project for the group was to replace all non-skid surfaces with new material. Luckily, the owner of Slips R Us found a great deal on slightly-used, mostly slip-resistant flooring that he can avoid taxes on by paying cash – he’ll make a killing on this deal! MONTE CARLO Similar to its sister-property, the Pebbles Resort-Hotel-Casino in Las Vegas, the Pebbles, Monte Carlo caters primarily to elderly visitors. The property is located directly on the coast and offers many boating excursions for their visitors. In the past, the excursions were led by a local captain. Unfortunately, last year, he was fired for stealing money from the passengers on a regular basis. Currently, most of the excursions are led by
- 6. local teenagers trying to make some extra cash. The manager finds this a great fit as the elderly passengers enjoy the perspective of the local youngsters, and the resort can hire the teenagers for very cheap pay and offer them no benefits. All teenagers are paid in cash at the end of the day. The Spinout School of Racing was opened in June of 2009. The Monaco Grand Prix is a Formula One motor race held on the Circuit de Monaco since 1929. Many racing fans flock to Monaco primarily for this event. The Spinout School of Racing was born of the idea to let regular tourists learn to race like a pro year-round! The school is primarily taught by retired Grand Prix competitors. It has become known for the opportunity to race in the streets of Monaco year-round – something no other school offers. The school has recently contracted with a new company, “Race or Die”, to maintain their vehicles. Race or Die just began operating in the spring of this year and this is their first big client; they are very excited.SYDNEY, AUSTRALIA The Pebbles Resort-Hotel-Casino in Sydney also caters primarily to elderly visitors. Similar to its sister property in Monte Carlo, it is very beautiful & located on the gorgeous waters of Port Jackson. In addition to boating adventures, this location also provides guests the opportunity to snorkel and scuba dive. Similar to the Monte Carlo location, all of the excursions are led by local teenagers. All teenagers are paid in cash at the end of the day. The Big Shark Surfing School is one of the newest endeavors by The Pebbles, Inc. Since Australia is always associated with beautiful water and wonderful surfing, The Pebbles, Inc. found this a great opportunity to cater to some tourist desires. The School is located in Sydney, but the attendees take busses to various locations such as Bondi, Tamarama, Bronte or Maroubra. The surf teachers are all local surfers who know how to have a good time. Typically the school is an all-day affair – attendees meet at the school, practice some moves, then the surf teachers drive them in busses to the beaches to start practicing.
- 7. After a few hours out in the water, the surf teachers let loose with their students and break open some Australian brews before heading back to the school. Generally, the ratio is 1 teacher to 10 students, but with one of their prime instructors being out due to a shark attack, the ratio is currently 1 teacher to 17 students. All of the teachers are paid in cash at the end of the day.OTHER OPERATIONS The Company also owns one ten-passenger twin-engine airplane that is piloted by various principals of the Company. The single engine plane is hangered in Las Vegas and is used to give preferred passengers tours. Also, the plane is often used to take friends of the Company officers on entertainment trips. INSURANCE AND RISK MANAGEMENT The Pebbles, Inc. has multiple insurance policies that renew on January 1. Insurance Premiums: $ 26,000,000.00 Retained Losses: $125,000,000.00 Admin cost of RM Program & Department Cost $1,250,000.00 The Pebbles, Inc. uses their broker as a consultant on their coverage placement – they currently pay the broker on a commission basis at a rate of 8% of insurance costs. For the past three years, The Pebbles, Inc. has been contracting their claims administration to a third party administrator who
- 8. charges 2% of their insurance costs to administer their claims. The Pebbles, Inc. also does a regular review of their risk control techniques and has spent $7,250,000.00 this year to control risks. Consolidated Balance Sheets Income Statement PART ONE: For each of the designated areas of exposure (domestic property, liability, contractual, net income, human resource and international), complete the appropriate Exposure Analysis Worksheet (next 3 pages). 1. Identify a few exposures that you feel may be potentially severe or frequent (or unique, which management might not have considered yet) that The Pebbles, Inc. should address as part of the risk management program. 2. Determine a frequency and severity rating for each exposure using the following scale: FrequencySeverity 1-remote A-slight 2-low
- 9. B-appreciable 3-moderate C-serious 4-high D-severe 5-probable E-catastrophic 3. Recommend at least one of the following risk control treatments for each exposure identified Avoid Prevent Reduce Segregate
- 10. Transfer Also suggest one SPECIFIC risk control technique that should be implemented for each identified exposure. 4. Draw a risk map depicting the exposures identified in (1.). EXPOSURE ANALYSIS WORKSHEET THE PEBBLES, INC. DOMESTIC PROPERTY Exposure(s) Frequency/ Severity Treatment Specific Plan LIABILITY Exposure(s) Frequency/ Severity
- 11. Treatment Specific Plan EXPOSURE ANALYSIS WORKSHEET THE PEBBLES, INC. CONTRACTUAL Exposure(s) Frequency/ Severity Treatment Specific Plan
- 12. NET INCOME / FINANCIAL ANALYSIS Exposure(s) Frequency/ Severity Treatment Specific Plan EXPOSURE ANALYSIS WORKSHEET THE PEBBLES, INC. HUMAN RESOURCES Exposure(s) Frequency/ Severity Treatment Specific Plan
- 13. INTERNATIONAL EXPOSURES Exposure(s) Frequency/ Severity Treatment Specific Plan PART TWO: Based on the exposures identified in Part One, please provide the following: Property: 1. What property valuation methods would you recommend? Liability:
- 14. Which method(s) would you recommend to identify the liability exposures (Please name 2 per location)? Why? Contractual: Which method(s) would you recommend using to identify the contractual exposures? Why? Give specific examples of both the methods and exposures. Net Income/Financial Analysis 1. Which method(s) would you recommend using to identify the net income exposures? Why? Human Resources 1. Which method(s) would you recommend using to identify the Human Resources exposures? Why? International Exposures 1. Are there any unusual international exposures that would require special attention? What are they? General 1. Are there any ethical issues facing The Pebbles, Inc.? What are they? What do you recommend? 2. What is the Cost of Risk for The Pebbles, Inc.? Please create a table showing how this was calculated. PART THREE : 1. For each of the property exposures identified above, indicate which Accident Prevention Basic you would recommend using and why. 2. Using the eight key elements of Safety & Health Programs, provide a description of a good safety and health program for
- 15. The Pebbles, Inc. and how you would implement the program. Given their industry, The Pebbles, Inc. has a significant number of walking surfaces. Please identify a maximum of 5 risk factors and what type of hazard controls you would put in place. PART FOUR: 1. Using the financial information provided above, please complete the chart below for the most current year of data Type Ratio Formula Calculation Benchmark Liquidity Current Ratio 1.5 & UP Quick Ratio 1.00 & UP Net Working Capital Debt (Please note that total debt is current portion of long term debt + long term debt) Debt Ratio .50 & DOWN
- 16. Debt to Equity Ratio 1.00 & DOWN Profitability Return on Assets 5% Return on Equity 15% 2. For the ratios with benchmarking data provided, identify the significance of the calculated value compared to the benchmark value (i.e. is The Pebbles, Inc.performing better or worse than industry). Has The Pebbles, Inc.improved over the prior year? PART FIVE: Claims Management As noted in the original description, The Big Gambler Resort, Hotel & Casino in Las Vegas has a theatre where resident performers are regularly booked. There is typically a 60 day gap between resident performers and, during that time, the theatre hosts travelling shows that don’t have a regular performance venue. The current act is a local rock band – Ignite Me – who is very popular and has a penchant for using heavy pyrotechnics between their sets. At approximately 11:45 PM last night, Ignite Me completes a rousing set of 80’s heavy metal. The lead singer, TNT, proceeds to give the signal to the crew to start the pyrotechnics. As soon as they begin, it is evident that there is a problem – within a few moments, the stage is engulfed in flames. The audience, used to a great Vegas show, thinks this is all part of the act initially but eventually begins to panic and attempt to
- 17. find their way to the exits. The exit signs have been faulty lately and only 2 of the 25 exits are clearly indicated. Chaos ensues. Once TNT and Ignite Me realize that the theatre is going up in flames, they exit the back of the theatre and hop onto their tour bus. Their manager quickly grabs the contract he has with the theatre and realizes that the section of the contract addressing the pyrotechnics was accidentally left off of this particular contract. 1. Specifically identify the steps The Pebbles, Inc. would need to take to handle this event (using the Claims Management process). Crisis Management 2. Please identify the Crisis Management process that The Pebbles, Inc. should follow. Briefly describe what each step entails. 3. What should The Pebbles, Inc. do in the first 24 hours after the fire? Page 5 of 14