Risk Management and Business Law
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Course Introduction
Risk Management and Business Law explores the essential principles and practices that organizations use to identify, assess, and mitigate risks while ensuring legal compliance in a complex business environment. The course examines the types of risks businesses face including financial, operational, strategic, and reputational and introduces frameworks for evaluating and managing those risks systematically. Students will gain an understanding of key legal concepts such as contracts, torts, regulatory requirements, and corporate governance, and learn how these intersect with risk management strategies. Through case studies and real-world examples, the course prepares students to make informed decisions that protect organizational assets and foster ethical, lawful business operations.
Recommended Textbook Managers and the Legal Environment Strategies for the 21st Century 7th Edition by
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Page 2
Constance E.
Chapter 1: law, value creation, and risk management
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Q1) Which of the following is true regarding laws and practices of the European Union and its members?
A) European antitrust regulators are often more sympathetic to competitors than are U.S. authorities.
B) European antitrust regulators lack the authority to block mergers.
C) European antitrust regulators have the authority to block only foreign mergers, not mergers of companies located within the European Union.
D) It is expected that the impact of the European Union on corporate planning and strategy will become less, not more, evident in the future.
Answer: A
Q2) As the public has become more concerned about childhood obesity,which of the following is a government agency referenced in the text that is considering a ban on certain types of children's advertising?
A) The American Consumer Agency
B) The Federal Communications Commission
C) The Federal Trade Commission
D) The Federal-State Advertising Coalition
Answer: B
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3
Chapter 2: Ethics ant the law
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Q1) Utilitarianism is a major deontological system that operates under the proposition that the ideal is to focus on motivation rather than on consequences.
A)True
B)False
Answer: False
Q2) If an action does not maximize shareholder value,and the firm has no ethical reason to act,the action should not be taken.
A)True
B)False
Answer: True
Q3) From 1990 until today,the gap between what average workers make and what CEO's of companies make in the Standard and Poor's Index has narrowed.
A)True
B)False
Answer: False
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Chapter 3: Courts, sources of law, and dispute resolution
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Q1) A judge will grant a motion to dismiss the complaint on all but the following grounds:
A) The plaintiff has failed to state a claim on which relief can be granted.
B) The court lacks jurisdiction over the subject matter or the parties involved.
C) The plaintiff has failed to offer the defendant an offer of settlement.
D) The plaintiff has failed to properly serve the complaint on the defendant.
Answer: C
Q2) A ______ action is brought by a representative of many people suffering the same harm.
A) Conglomerate
B) Group
C) Representative
D) Class
Answer: D
Q3) A federal court of appeals in one circuit must follow an earlier decision on an issue made by a federal court of appeals in another circuit.
A)True
B)False
Answer: False
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Chapter 4: Constitutional bases for business regulation
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Q1) The Second Amendment to the U.S.Constitution grants persons the right to bear arms.
A)True
B)False
Q2) What did the U.S.Supreme Court decide regarding whether the Violent Crimes Against Women Act was validly enacted by Congress?
A) That the law was validly enacted under the authority of the due process clause of the U.S. Constitution.
B) That the law was validly enacted under the authority of the equal protection clause of the U.S. Constitution.
C) That the law was not valid because it discriminated against men.
D) That the law was not valid because Congress exceeded its authority under the Commerce Clause of the U.S. Constitution.
Q3) The doctrine of federalism serves to allocate power between the federal government and government by the states.
A)True
B)False
Q4) Under what circumstances is state law preempted in favor of federal law?
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Chapter 5: Agency
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Q1) The Telephone Records and Privacy Protection Act of 2006 makes it illegal for a person to use fraud to obtain individual customer billing records and other customer information from telephone companies.
A)True
B)False
Q2) Federal law provides that electronic agents may legally bind a user to click-wrap agreements.
A)True
B)False
Q3) Molly wants to buy a vacant lot that is for sale in her neighborhood. The problem is that she had a skirmish with the current owner,Ben,over his dog barking at all hours of the night. Molly asks Sam if he will purchase the lot on her behalf without telling Ben that she will be the true owner. Sam agrees and reaches an agreement with Ben. A few months after the purchase,Molly begins to do some work on the lot. Ben sees her and asks what she is doing. Molly tells him that she was the true purchaser. Ben becomes furious and yells at her that he will have the sale rescinded and sue both Molly and Sam for fraud. What will be the likely result if Ben sues Molly and Sam?
Q4) What is considered in determining the scope of an agent's implied authority?
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Chapter 6: Administrative Law
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Q1) After the passage of the National Environmental Policy Act,
A) each federal agency assumed a new procedural obligation to consider the environmental impacts of its proposed actions and the alternatives to those impacts.
B) each federal agency had to take "substantial" steps to reduce any environmental harm caused by it.
C) each federal agency had to take "reasonable" steps to reduce any environmental harm caused by it.
D) each federal agency had to seek approval from the applicable state legislature before taking action that would have an environmental impact in that state.
Q2) Statutes and agency rules often provide that courts performing judicial review of agency action may not rule on which of the following issues?
A) issues raised with the agency and won.
B) issues raised with the agency and lost.
C) issues raised with the lower courts and lost.
D) issues not raised with the agency.
Q3) The president of a company wishes to comment on a proposed administrative agency rule. What does a comment letter usually contain?
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Chapter 7: Contracts
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Q1) Consideration can be either a promise to do a certain act or the performance of the act itself.
A)True
B)False
Q2) Which of the following is true regarding the effect of death and incapacity on an offer?
A) Death or incapacitation of either party terminates an offer.
B) Death of either party terminates an offer, and incapacity on the part of the offeror terminates an offer, but incapacity on the part of an offeree does not terminate an offer.
C) Death of either party terminates an offer, and incapacity on the part of an offeree terminates an offer, but incapacity on the part of the offeror does not terminate an offer.
D) Neither death nor incapacity on either the part of the offeror or offeree terminates an offer.
Q3) What are the four basic elements necessary for a valid contract?
Q4) An objective standard is used in determining whether an offer has been made.
A)True
B)False
Q5) Define the term "consideration" as it is used in contract law.
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Chapter 8: sales,licensing,and e-commerce
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Q1) Which of the following is an online agreement that appears on a website but does not require the user to take any action to express his or her consent to the agreement?
A) Click-wrap license
B) Browse-wrap agreement
C) Shrink-wrap license
D) Computer-license agreement
Q2) A(n)________ contract occurs when one party is induced to enter a contract on a "take it or leave it" basis.
A) adhesion
B) merchants
C) output
D) requirement
Q3) What is the rule regarding the enforceability of a contract for the sale of goods that comes within the statute of frauds if no quantity is specified?
Q4) Many states have applied Article 2 of the UCC to software licenses either directly or by analogy.
A)True
B)False
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Chapter 9: Torts and Privacy protection
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Q1) Intent may be transferred.
A)True
B)False
Q2) Refer to fact pattern 9-3. What would you tell Alex regarding whether he should sue Blake for committing an assault?
A) That it appears that the necessary elements are present for him to succeed in an action against Blake for assault so long as he can show apprehension of being struck.
B) That he could not win in an action for assault because he admitted that he was not afraid.
C) That he could not win in an action for assault because Blake did not actually strike him.
D) That he could not win in an action for assault because it appears that Blake's actions were justified.
Q3) Set forth the majority rule in relation to an accountant's liability for negligence to a third party with whom the accountant does not have a contractual relationship as well as the source of the rule.
Q4) Define and explain the theory behind the economic loss rule.
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Chapter 10: product liability
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Q1) In regard to strict liability in tort,which of the following is true in the case of a seller of used goods?
A) Sellers of used goods are not usually held strictly liable for goods sold.
B) A seller of used goods is strictly liable for defective repairs made by the seller.
C) A seller of used goods is usually held strictly liable only for inherently dangerous items such as power tools.
D) A seller of used goods is usually held strictly liable only for inherently dangerous items such as power tools or for defective repairs made by the seller.
Q2) Following several injuries,a manufacturer of a chain saw installed an additional safety guard. In a lawsuit based on products liability,which of the following is the company's best position in opposition to a plaintiff's efforts to introduce evidence of the modification?
A) That the modification was just recently designed.
B) That the modification involved a subsequent remedial measure.
C) That the company was not negligent.
D) There is no best position because it is well established that the evidence would be admitted.
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Chapter 11: Intellectual property
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Q1) A ________ placed on a product indicates that the product has met the certifier's standards of safety or quality.
A) certification mark
B) trademark
C) service mark
D) trade name
Q2) A _________ mark is a coined term having no prior meaning until used as a trademark in connection with a particular product.
A) arbitrary
B) suggestive
C) descriptive
D) fanciful
Q3) A copyright is a government-granted right to exclude others from making,using,or selling an invention.
A)True
B)False
Q4) A trademark does not necessarily reveal the product's manufacturer.
A)True
B)False
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Chapter 12: The employment agreement
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Q1) List exceptions,if any,to the Employee Polygraph Protection Act's ban on polygraph testing.
Q2) List the factors set forth in the text that may give rise to an implied obligation to discharge the employee only for good cause in jurisdictions recognizing the contract-based implied contract judicial exception to the employment-at-will rule.
Q3) Which of the following is true regarding private employer monitoring of employee e-mail on company-owned equipment?
A) There is a federal law prohibiting private employers from monitoring employee e-mail on company-owned equipment.
B) Most states have state laws prohibiting private employers from monitoring employee e-mail on company-owned equipment.
C) Most states allow private employers to monitor employee e-mail on company-owned equipment, but employees must first be warned that the e-mail will be monitored.
D) Most courts have upheld a private employer's right to monitor employee e-mail on company-owned equipment.
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Chapter 13: civil rights and employment discrimination
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Q1) Under the Americans with Disabilities Act (ADA)a person who is only regarded as having an impairment that substantially limits one or more of that person's major life activities cannot qualify as disabled.
A)True
B)False
Q2) The U.S.Supreme Court has ruled that a showing of a serious effect on an employee's psychological well-being is necessary for a hostile work environment claim under Title VII.
A)True
B)False
Q3) A reasonable accommodation for a disabled employee is required whether or not it would impose an undue hardship on the employer.
A)True
B)False
Q4) Specifically set forth what courts consider in order to determine whether there is a hostile or abusive work environment.
Q5) Plaintiffs in Title VII cases may only bring claims of harassment based on sex. A)True
B)False
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Chapter 14: Criminal law
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Q1) Requiring a person to appear in a lineup does not violate the Fifth Amendment privilege against self-incrimination.
A)True
B)False
Q2) Refer to fact pattern 14-1. Can Beatrice be tried again for the same crime?
A) No, because of the double jeopardy bar.
B) Only if at least five of the jurors voted in her favor to acquit her.
C) Only if at least six of the jurors voted in her favor to acquit her.
D) Yes.
Q3) Criminal recklessness is when a person consciously intends to cause the harmful result.
A)True
B)False
Q4) Most computer-aided thefts can be prosecuted under traditional state larceny laws.
A)True
B)False
Q5) The Fifth Amendment grants the criminal defendant a right to a trial by jury.
A)True
B)False
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Chapter 15: Environmental law
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Q1) The EPA is a cabinet-level department
A)True
B)False
Q2) Under CERCLA the Superfund money is spent
A) on a first come first served basis.
B) based in part on a national priorities list.
C) in chronological order from the date of the discovery.
D) according to the allocation voted by Congress.
Q3) Failure to comply with environmental laws can result in civil fines but not criminal penalties.
A)True
B)False
Q4) The _______ occurs when individuals exploit a limited shared resource and contribute to its depletion knowing that there will be a detrimental impact in the long term.
A) impact on the masses
B) destructive resources impact
C) tragedy of the commons
D) absolute negative
Q5) What is the Kyoto Protocol? Is the U.S.a signatory?
Page 17
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Chapter 16: Antitrust
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Q1) Local municipalities may not be held liable for antitrust damages and are not subject to equitable remedies such as injunctions.
A)True
B)False
Q2) Which of the following is not true regarding Section 2 of the Sherman Act?
A) Unilateral conduct may violate Section 2.
B) Section 2 allows the mere possession of monopoly power.
C) A firm violates Section 2 even if attains the monopoly power by superior performance.
D) The offense of monopolization has two elements: monopoly power and proof that the defendant willfully acquired or maintained that power through anticompetitive acts.
Q3) Which of the following is a component of a market?
A) A product component
B) A geographic component
C) A defined component
D) Both a product component and a geographic component
Q4) What must a plaintiff demonstrate for liability to attach under Section 1 of the Sherman Act?
Q5) What types of price-fixing agreements are considered horizontal price-fixing?
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Chapter 17: Consumer Protection
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Q1) The ________ has primary responsibility for regulating the labeling of food
A) Federal Trade Commission
B) Food and Drug Administration
C) The Consumer Product Safety Commission
D) The Federal Trade Commission
Q2) Set forth the definitions used for determining whether an item is a food or a drug for purposes of FDA categorization.
Q3) The Equal Credit Opportunity Act originally intended to prevent discrimination against ________ in the advancement of credit.
A) religion
B) age
C) women
D) color
Q4) The Truth-in-Lending Act limits credit card liability to $50 per card for unauthorized charges made before a card issuer is notified of a lost or stolen card.
A)True
B)False
Q5) Set forth the four main provisions of the CAN-SPAM Act.
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Chapter 18: real property and land use
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Q1) Refer to fact pattern 18-1. Which of the following is a term used for the dump in which Prudence is interested?
A) Black area
B) Brownfield
C) Red zone
D) Danger zone
Q2) A warranty of _______ is applied in a minority of jurisdictions and involves a warranty at the inception of a commercial lease that there are no latent defects in the premises that will prevent the premises from being used for its intended purpose and that the premises will remain in a suitable condition.
A) habitability
B) merchantability
C) suitability
D) fitness for a particular purpose
Q3) A title insurance policy does not insure against
A) defects in title.
B) undisclosed liens.
C) defects in warranties.
D) errors in the abstraction of the title.
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Chapter 19: Forms of business organizations
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Q1) The _______ is the simplest and most prevalent form of business enterprise in the U.S.
A) S Corporation
B) Partnership
C) Sole proprietorship
D) Joint Venture
Q2) A ________ is a public offer to all the shareholders of a corporation to buy their shares at a stated price.
A) leveraged buy out
B) tender offer
C) target bid
D) merger
Q3) In most jurisdictions,there is no quorum unless the holders of at least _______ of the outstanding shares are present in person or by proxy.
A) 25%
B) 33%
C) 50%
D) 75%
Q4) Explain requirements for formation of an S corporation.
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Chapter 20: Directors, Officers, and Controlling
Shareholders
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Q1) What is a no-shop agreement?
A) An agreement whereby shareholders agree to not replace directors for a certain period of time.
B) An agreement whereby directors agree to not replace officers for a certain period of time.
C) An agreement whereby a target company agrees with a potential purchaser not to actively solicit other bidders but retains the right to negotiate with parties who submit unsolicited bids to the Target.
D) An agreement whereby shareholders agree to not replace directors or officers for a certain period of time.
Q2) Maurice is a fairly new director at ABC Corp. Peg,another director,tells him that she believes that the company is in Revlon mode and that the directors should act accordingly. What is Peg referencing?
Q3) What is a poison pill? What factors favor keeping a poison pill in place?
Q4) A shareholder derivative action is a suit brought by a shareholder on behalf of the corporation.
A)True
B)False
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Chapter 21: Public and Private Offerings of Securities
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Q1) The ________ is the private offering counterpart to the prospectus.
A) private registration prospectus
B) red-herring prospectus
C) private-placement memorandum
D) restricted sale
Q2) Discuss when a promissory note will be considered a security including a detailed discussion of the family resemblance test.
Q3) Mere promotion of a security makes a person a seller and,therefore,liable under section 5 of the 1933 Act based upon the sale of a security without an effective registration statement or by means of a noncomplying prospectus.
A)True
B)False
Q4) Which of the following is not part of the Howey test?
A) scienter
B) an investment of money
C) common enterprise
D) profits obtained solely through the efforts of others
Q5) Set forth the three tests under which a general partnership may be found to be a security?
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Chapter 22: Securities Fraud and insider trading
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Q1) Refer to fact pattern 22-1. Is there a basis upon which to hold Frank liable for a securities violation based upon his receipt and use of the information?
A) No because he had no duty toward Food Corporation.
B) Yes, he could be held liable as a tipper.
C) Yes, he could be held liable as a tippee.
D) Yes, he could be held liable as a remote tippee.
Q2) Refer to fact pattern 22-1. Can Trudy be considered an insider of Food Corporation?
A) No
B) Yes, as a derivative insider.
C) Yes, as a temporary insider.
D) It depends on whether she was paid as an employee or independent contractor because she may be considered an insider only if she was paid as an employee.
Q3) An employee who trades or tips using confidential information belonging to his or her employer can be liable under the Mail and Wire Fraud Acts.
A)True
B)False
Q4) List the seven elements of a Rule 10b-5 cause of action.
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Chapter 23: Debtor-Creditor Relations and Bankruptcy
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Q1) Bob goes bankrupt.He has several creditors and a small amount in savings. He owes XYZ Bank $200,000 for which he used his home as collateral. XYZ Bank properly perfected its interest in the home. Bob additionally owes $3,000 in alimony to an ex-wife,Sue; $50,000 in unsecured credit card bills; and $5,000 in unsecured debt to his friend Tina. After all exemptions are satisfied,$205,000 from the sale of the home and $5,000 in a small bank account remain for distribution to creditors. Which of the following is true regarding priority?
A) All funds are added together and disbursed to the claimants based upon the percentage of each creditor's claim.
B) Tina has first priority, the credit card companies are then paid, and XYZ Bank is entitled to any remainder.
C) XYZ Bank receives $200,000 from the sale of the home, Sue receives $3,000, and the remainder is divided between the credit card companies and Tina.
D) Tina has first priority, XYZ Bank is then paid, and the credit card companies divide the remainder.
Q2) Set forth the five events referenced in the text that usually constitute events of default.
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Chapter 24: International Business
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Q1) Which of the following is a legal principle of international law under which nations submit their decision-making authority to a common organization or institution?
A) Private international law
B) Supranational law
C) The international naturalized agreement
D) The foreign resolution principle
Q2) All member states of the European Union apply a single set of tariffs,called the _______ tariff,on goods imported from outside the European Union
A) accepted use
B) mandated application
C) common customs
D) European exaction
Q3) Customary practice arises from legislative action.
A)True
B)False
Q4) What is the principle of comity? What conditions must usually exist for the principle to be applied?
Q5) What is the act-of-state doctrine,and how is it generally applied by U.S.courts?
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